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It’s what we are calling the “premium economy” credit card – though some may say it’s just economy.

Westpac has launched a “no frills” credit card with a rate of “less than 10 per cent”. And indeed it is:  9.99 per cent.

It’s no frills because there are no awards points or fancy gift schemes.

But the cards, designed to silence critics who have claimed credit card debt is the most toxic of all with interest rates of up to 25 per cent, look set to spark a price war.

Westpac and ANZ have already slashed interest rates on its plastic cards as part of the credit card battle.

This week, Westpac said it is working on the new basic credit card with an interest rate of less than 10 per cent  – a first for any major bank.

Westpac’s consumer banking boss George Frazis said: “I think this is a huge breakthrough for us and the market.”

“Hundreds of thousands of customers will go after this card, that’s for sure. It’s a compelling offer.

“We are helping families to manage their weekly and monthly cashflow in a responsible way,’’ he said.

The card has not actually been launched yet, so we’ll have to watch this space for full details.

Westpac’s new card is expected to have a maximum credit limit of about $4000,  which is relatively low. While it is unlikely to have fees for late payments, it will have an all-inclusive annual fee of more than $100.  

It will not offer travel insurance.

Last week, ANZ broke ranks and cut its interest rates on its credit cards by up to two per cent.  ANZ will cut the rate on its “low rate platinum” card by 200 basis points to 11.49 per cent  and on another card by 100 basis points to 12.49 per cent.

More than 500,000 ANZ customers are expected to benefit from this move, with most saving up to $150 a year on interest.

All eyes will now be on how CBA and NAB, who will respond to the cuts in interest rates by their rivals. However NAB spokesperson was only prepared to say that the bank regularly reviewed the interest rates of all their products including credit cards.

A CBA spokesperson said: “We frequently review the pricing and features of our credit cards. The credit market is highly competitive and consumers have plenty of choice with 100 brands and 250 different credit cards on offer.

“While we know having an attractive rate is important, there are also many features such as loyalty programs, fraud protection and included bonuses such as travel insurance that will determine the type of card a customer chooses.’’

The Big Four – CBA, ANZ, NAB and Westpac  – will reappear before the House of Representatives economic committee. They have been accused of gouging consumers at a parliamentary committee last year and face increasing political pressure to address the cost of credit cards.

But before we all get carried away, according to Choice magazine, credit unions offer credit cards with interest rates as low as 8.99 per cent while Bank Australia has a credit card with a rate of 9.49 per cent.