Last week, PayPal announced the launch of its new rewards credit card, which it intends to release to the Australian market some time in July. Given the fact that this credit card will allow cardholders to earn rewards while paying no annual fee, we thought we’d take this opportunity to round up all the other no annual fee rewards cards available right now to see how they compare.
After checking out what the new PayPal credit card has to offer, we’ll then take a quick detour to investigate why the company may be moving in this direction. From there, we’ll break down each of the no annual fee rewards cards currently available, to dig deeper into the value they offer – and how they compare to their more illustrious counterparts that have annual fees.
So, what do we know about the PayPal credit card so far?
Over the past year, Australian cardholders have been working hard to pay down their credit card debt. According to recent Reserve Bank figures, Aussies paid down $62.1 million in personal credit card debt accruing interest during April alone, bringing the overall amount owing to $19.96 billion. This total is $5.47 billion lower – around 21.5% – than April 2020.
Not only that, the data also revealed that there were 58,550 fewer personal credit card accounts this April than the month before, and 919,007 fewer than in April 2020.
Add to that the fact that the expansive Buy Now, Pay Later (BNPL) offering here in Australia has received an extraordinary response from users, and you may be wondering why PayPal is even bothering to launch a credit card.
According to Andrew Todd, general manager of payments at PayPal Australia, there is still plenty of opportunity within the credit card market.
“We know that more and more Australians are using BNPL products, which will include PayPal ‘Pay in 4’ very soon,” Mr Todd said. “But RBA data shows credit cards account for 19% of all consumer payments, which is the same share as in 2013. That’s a significant proportion of our customers that we want to ensure we’re accommodating.”
In other words, it seems PayPal wants to cover all bases, providing every possible payment option to users, no matter how they want to pay. “There’s no silver bullet option that’s preferred by all Australians,” Mr Todd continued. “So we want to ensure that however customers prefer to pay, they can choose to do it with PayPal.”
“We are focused on delivering a one-stop payments shop.”
This is becoming particularly apparent over in the US, where PayPal is apparently planning to launch an array of new services, which could include high-yield savings accounts, cheque-cashing services and stock-investing capabilities.
According to Canstar finance expert, Steve Mickenbecker, PayPal can afford to buck the trend within a declining credit card market, simply because of its current reach.
“They’ve got such a position of strength in the online retail space and they can leverage on that from three angles,” Mr Mickenbecker said. “They can look at the usage patterns of existing PayPal users, they can offer the PayPal credit card as a link to the PayPal online payments system, and they can link the rewards to PayPal’s merchandising partners.”
“It would be tougher for a new player to make inroads in a physical marketplace, because you’re just competing with everyone else and your offer is no different.” (1)
When it launches next month, the PayPal Rewards Credit Card will be joining a crowded market. There are 70 or so credit cards available here in Australia, with about 40% of those offering rewards.
So, what’s going to set PayPal’s credit card apart?
When you have a rewards card, value should come above all else in terms of what’s important. For the card to be worthwhile, it needs to offer more in value (from the rewards you earn and the extras you use) than you pay out in annual fees. Charging no annual fee, the PayPal credit card could be pretty darned appealing, as it essentially allows you to get something for nothing.
While we are yet to find out how much earned points will equate to in dollar terms, many cardholders will appreciate the fact that the PayPal credit card will allow them to earn uncapped rewards that never expire. This is not always the case, especially with lower cost and no annual fee rewards cards.
One common complaint from rewards cardholders over the past year is that valuable rewards are harder to come by. Previously, points were best redeemed on overseas flights and upgrades, but with international travel off the table, much of the value in those rewards programs has been lost. Read more on travel rewards value here.
This is another factor that may set the PayPal credit card apart. Instead of redeeming points on travel, PayPal credit cardholders will be able to use their points to cover everyday purchases, or alternatively, pay down their credit card statement. It’s worth noting that some credit cards offer this functionality already. What it will come down to is the redemption value PayPal offers.
PayPal is a well known brand. So well known, in fact, it has more than 9.1 million active users in Australia. Its current offering is easy to use and well integrated into a number of services and platforms. With its credit card, PayPal will only expand its useability, allowing those who are familiar with the brand to incorporate the card’s functionality into their everyday life with ease.
Another appealing aspect of the PayPal credit card comes from the fact that cardholders will be able to use their card as soon as they’re approved. This could come in especially handy for cardholders who have their eye on something and don’t want to wait until their card arrives in the post to buy it.
Used within a digital wallet, the card will offer further functionality for cardholders who prefer to pay with their device.
As the purchase rate on the PayPal credit card shows, you can’t have everything. While it’s not as high as some credit card purchase rates, 20.99% p.a. is nothing to be sniffed at. Cardholders who tend to carry a balance would be better off looking elsewhere to keep their interest costs down.
There are currently seven rewards cards on the market that charge no annual fee. Here’s how they stack up.
|Card||Purchase Rate||Earn Rate|
|American Express Essential Credit Card||14.99% p.a.||1.25 Membership Rewards points per $1. |
1 Membership Rewards point per $1 on government spending.
|BankVic Qantas Visa Credit Card||16.95% p.a.||0.5 Qantas Points per $1|
|Coles No Annual Fee Mastercard||19.99% p.a.||0.5 Flybuys points per $1|
|HSBC Premier Credit Card||19.99% p.a.||1 HSBC Rewards Point per $1|
|American Express Qantas Discovery Card||20.74% p.a.||0.75 Qantas Points per $1. |
0.5 Qantas Points per $1 on government spending.
|American Express Velocity Escape Card||20.74% p.a.||0.75 Velocity Points per $1. |
0.5 Velocity Points per $1 on government spending.
|Kogan Money Black Card||20.99% p.a.||2 points per $1 spent at Kogan. |
1 point per $1 everywhere else.
|PayPal’s Rewards Card (yet to launch)||20.99% p.a.||1 rewards point per $1|
Now, let’s look at each card in more detail to find out just how much value each one can potentially offer. For each card, we’ll assume a $20,000 annual card spend to calculate its value.
American Express Essential Credit Card
The American Express Essential Credit Card combines a relatively low purchase rate of 14.99% p.a. and up to 55 days interest free on purchases with no annual fee. Up to four additional cardholders can be added to the account at no extra cost, effectively boosting the primary cardholder’s points earned.
It has an uncapped earn rate of 1.25 Membership Rewards points per $1 on all eligible spending, apart from government spending, which has a rate of 1 Membership Rewards point per $1.
In terms of features, it provides Smartphone Screen Insurance, covering cardholders for smartphone screen repairs up to $500. It also provides a range of purchase covers, in addition to 12 months Centr membership, at a value of $119.
The Membership Rewards program is flexible in its redemption options.
Assuming none of that spending was made at government agencies, you would receive 25,000 Membership Rewards points, equal to:
The value of those points when used to book travel with American Express Travel, or to pay down card purchases is unknown. American Express offers different redemption rates depending on the card you have.
BankVic Qantas Visa Card
The BankVic Qantas Visa Card is only available to Police Association of Victoria and Victorian Ambulance Union members. For that reason, we won’t go into too much detail on this one.
However, it does offer cardholders the opportunity to earn uncapped Qantas Points at a rate of 1 Qantas Point per $2 on eligible spending, with 2 bonus points per $1 on Qantas flights. It also provides complimentary overseas travel insurance.
Coles No Annual Fee Mastercard
Cardholders who apply for the Coles No Annual Fee Mastercard by 30 June 2021 will receive $100 off their Coles supermarket shop. To be eligible, cardholders must spend $1,000 or more within 60 days of approval.
Using the card day-to-day, cardholders will receive 1 Flybuys point per $2 spent. The card also offers purchase cover and access to the card’s personal concierge service.
Redeeming points is a simple process within this program.
In return for your $20,000 card spend, you would receive 10,000 Flybuys points, equal to:
It’s worth noting that when you use the Coles No Annual Fee Mastercard at Coles and Coles affiliate stores, you will double dip on points, boosting your earn.
HSBC Premier Credit Card
Earning points on the HSBC Rewards Plus program, the HSBC Premier Credit Card provides an earn rate of 1 HSBC Rewards Point per $1 on domestic spending, and 1.5 HSBC Rewards Points per $1 on international spending. Points are capped at 10,000 per statement period.
There is no annual fee for the primary cardholder or additional cardholders.
Extras on the card include:
What about redemption options? Points earned in the HSBC Rewards Plus program can be redeemed for:
Spending $20,000 on the HSBC Premier Credit Card within Australia would give you 20,000 HSBC Rewards Points, equal to:
Qantas American Express Discovery Card
The Qantas American Express Discovery Card has no annual fee, and allows up to four additional cardholders at no extra cost. The card has an uncapped earn rate of 1.75 Qantas Points per $1 on eligible Qantas products and services, and 0.75 Qantas Points per $1 on all other purchases, apart from government spending, which offers an earn rate of 0.5 Qantas Points per $1.
In terms of extras, the card provides a range of purchase covers.
And redemption options? The Qantas Frequent Flyer program provides a diverse range of ways for cardholders to redeem points, including flights and upgrades with Qantas and its partners, and gift cards and merchandise in the Qantas Store.
Your $20,000 spend on the Qantas American Express Discovery Card would give you 15,000 Qantas Points, equal to:
American Express Velocity Escape Credit Card
Like the other American Express cards in this list, the American Express Velocity Escape Credit Card charges no annual fee for both the primary cardholder and up to four additional cardholders.
It provides an earn rate of 1.75 Velocity Points per $1 on eligible Virgin products and services, and 0.75 Velocity Points per $1 on all other purchases, excluding government spending, which offers a rate of 0.5 Velocity Points per $1.
Keeping extras pretty basic, the card offers a range of purchase covers.
Spending $20,000 on everyday purchases, you would receive 15,000 Velocity Points, equal to:
Kogan Money Black Credit Card
The Kogan Money Black Credit Card is currently offering up to $400 Kogan.com credit to new cardholders. To be eligible for this offer, cardholders must make one eligible purchase in the first 30 days to receive $50 Kogan credit, and then spend $1,500 in the first 90 days to receive the remaining $350 Kogan credit.
Offering an uncapped earn rate, the card allows cardholders to earn 2 rewards points per $1 on all eligible spending at Kogan.com, and 1 rewards point per $1 on all eligible spending elsewhere.
There is no annual fee for the primary cardholder and up to four additional cardholders. Perks include complimentary Kogan First membership, valued at $99 per year, which provides free shipping on thousands of products, express shipping upgrades, and access to exclusive special offers.
Redeeming points in this program can be done in two ways. Cardholders can either choose to redeem their points for eligible purchases at Kogan.com, or to cover credit card payments made at Kogan Mobile or Kogan Internet. With both options, 100 Points equals $1 of credit.
The number of points you receive on a $20,000 card spend will depend on where you use the card.
PayPal Rewards Credit Card
Unfortunately, PayPal has not yet provided details of the value of points earned within its rewards program.
Okay, so now we know what kind of value you can expect from each of the no annual fee rewards cards on the market, let’s take a look at how that compares to the value offered on higher tier rewards cards that do charge annual fees.
For a $195 annual fee, the American Express Platinum Edge Credit Card provides a boost on the Essential card’s earn rate of 1 Membership Rewards point per $1, as follows:
The card balances out its annual fee with $200 travel credit that can be used with American Express Travel. Other additional extras on the card include complimentary international and domestic travel insurance.
Value on $20,000 card spend: 20,000 to 60,000 Membership Rewards points compared to 25,000 Membership Rewards points.
Meanwhile, the American Express Platinum Charge Card has a much higher annual fee at $1,450. However, as it goes all out on extras, cardholders should get all of that back and more, as long as they use the card correctly.
Value on $20,000 card spend: 45,000 Membership Rewards points compared to 25,000 Membership Rewards points. With that being said, this type of card rewards big spending. If you were only spending $20,000 on the card each year, it wouldn’t provide as much value as it should.
To keep the Coles Rewards Mastercard in your wallet, you will pay a standard annual fee of $99, with no annual fee in the first year.
In terms of points earn potential, the Coles Rewards Mastercard ups the ante significantly, providing an earn rate of 2 Flybuys points per $1 up to $3,000 each statement period, and 1 Flybuys point per $1 thereafter. This compares to the no annual fee card, which offers 0.5 Flybuys points per $1.
The Coles Rewards Mastercard also offers 20,000 bonus Flybuys points after a $500 spend in the first 60 days, and no international transaction fees on purchases when you’re shopping online.
Value on $20,000 card spend: 40,000 Flybuys points compared to 10,000 Flybuys points.
Unlike the HSBC Premier Credit Card, the HSBC Platinum Credit Card charges a standard annual fee of $129, reduced to $29 in the first year.
Strangely enough, the platinum card has the same earn rate on domestic spending as the premier card (1 HSBC Rewards Points per $1). But, it does have an increased earn rate on international spending at 2 HSBC Rewards Points per $1 (compared to 1.5 points per $1). It also has the same points cap in place at 10,000 points per statement period.
The only obvious additional value the platinum card seems to offer is two airport lounge passes per year via LoungeKey.
Value on $20,000 card spend: 20,000 HSBC Rewards Points, which is the same as the no annual fee Premier card.
With an annual fee of $249, the Qantas American Express Premium Credit Card offers an earn rate of 1 Qantas Point per $1 spent on all eligible spending, compared to the Discovery card, which offers 0.75 Qantas Points per $1.
It also has a few perks up its sleeve.
Value on $20,000 card spend: 20,000 Qantas Points, compared to 15,000 Qantas Points.
As for the Qantas American Express Ultimate Credit Card, it offers slightly more for its $450 annual fee. First up, it has a higher earn rate of 1.25 Qantas Points per $1, plus the following:
Value on $20,000 card spend: 25,000 Qantas Points, compared to 15,000 Qantas Points.
With an annual fee of $375, you’d expect the American Express Velocity Platinum Credit Card to offer quite a bit more than its Escape counterpart. In terms of earn rate, the platinum card provides 1.25 Velocity Points per $1 on all eligible spending, which compares favourably to 0.75 Velocity Points per $1 offered on the Escape card.
As for perks, these include:
Value on $20,000 card spend: 25,000 Velocity Points, compared to 15,000 Velocity Points.
If you’re ready to start comparing rewards cards, you can use our handy comparison tool here.
Founder of Creditcard.com.au. Roland has extensive knowledge about credit cards in Australia. Known as a credit card expert, he has been featured on tv and in various publications. Some popular offers on our site right now include the ANZ Low Rate. This special offer has no annual fee first year, a low purchase rate and long 0% balance transfer. Have a look also at the huge 0% for 30 months balance transfer from Citi with no balance transfer fees.
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