Plastic credit cards are yesterday’s news. Even when you can load the details onto your phone to use for Tap n Go purchases, they work like an aftermarket addition rather than a truly digital financial tool.

But now there’s a credit card available that’s designed from the ground up to be used only in your digital wallet or online. It’s called the MONEYME Freestyle Virtual Credit Card, and its features will seriously challenge traditional credit cards.

This is how it works.

Fast and simple application, rapid approval process, use instantly

MONEYME is so confident about its AI-based fast application and approval process, it says that you could find something you’d like to purchase – in-store or online – apply for the card, and possibly be able to use it by the time you finish browsing and arrive at the checkout. A challenge to Buy Now Pay Later services, perhaps?

The streamlined online application form can be completed in a few minutes if you have all your details handy. And you’ll also know in minutes, not days, if your application has been approved. After that, instead of waiting for a card to arrive in the mail, you can use it at once using the details supplied in the MONEYME app. Use it for Tapn Go purchases in-store via Apple Pay or Google Pay.

Up to 55 days interest free on purchases

Most credit cards offer interest-free days on purchases, and MONEYME has chosen to grant the longer of the typical credit card interest-free periods – 55 days instead of the shorter 44 days, which is a significant benefit. It means that you will never pay a cent of interest on purchases if you always repay your purchases balance in full, on or before each month’s due date.

But if you find that your budget is stretched, meaning that you need to carry a balance from month to month, you can take advantage of a potentially low interest rate, depending on your credit score and financial circumstances.

Cash advances are also available – by making an online transfer to your bank account – but, as with all credit cards, there are no interest-free days on cash advances. You’ll pay the same potentially low interest rate, but it is applied from the day you take the advance until you repay it in full.

Peer-to-peer cash advances (e.g. pay your friends for a split restaurant bill) are coming to the card in the near future.

Lower interest rate potential

All credit card interest rates are relatively high, and some are as high as 20% or more for carried-over purchases balances, and even more for cash advances.

MONEYME’s interest rate on both purchases and cash advances starts at a relatively low 14.99% p.a. You will qualify for this interest rate if you have an adequate credit rating and other acceptable financial details, but you may be offered a higher rate if your credit score and history do not meet the required standard. This is preferable to a refusal of your application.

How MONEYME assesses your application and allots an interest rate and credit limit

MONEYME will look at your credit score – the numerical representation of your credit history kept in a file at one of Australia's credit bureaus – but that’s only part of the picture. They will also take into account your income, any other financial commitments you may have, and your regular living expenses. It’s a fairer way to assess your application than just focusing on your credit score and any black marks in your credit history.

Based on this assessment you will be allocated a credit limit (between $1,000 and $20,000), an interest rate (between 14.99% and 25.99% p.a.) and a repayment period (monthly or fortnightly). The better your credit score and financial situation, the better the terms you are offered will be, but this flexibility means that people with less than perfect credit history and scores need not be deterred from applying. And if you demonstrate an ability to manage your account responsibility, you are likely to graduate to improved terms down the track.

If you wish, you can find out your credit score free of charge before you apply.

Fees and charges

Once again, MONEYME does things a little differently, with fees based on your credit limit and balance owing, rather than fixed fees:

Annual fee

• $0 for credit limits up to $3,000
• $49 for credit limits between $3,001 and $5,000
• $149 for credit limits between $5,001 and $20,000

Monthly fee

• $0 for balances under $20
• $5 for balances over $20

Potentially having to pay both a monthly and an annual fee is not ideal, but it means that if you want only a low credit limit you are likely to get away with paying only $60 (12 x $5) annually.

Late payment fee

If you miss a payment, or pay late, you’ll be charged an overdue fee of $15.

Foreign transaction fee

The Mastercard foreign exchange fee is 2.99% of the transaction amount, if you use your card overseas or pay online in a foreign currency. This is a typical fee levied by most credit cards, although some don't charge a foreign transaction fee at all.

Alternative options to consider

Truly virtual credit cards available in Australia are limited to MONEYME, Nimble (maximum credit limit $10,000), and Visa Virtual.

But if you’re looking for a basic, low-interest credit card, you should also consider the Westpac Low Rate Credit Card, the Bankwest Breeze Mastercard, the NAB Low Rate Card and the St.George Vertigo Visa, to name just a few.

Check out all the low rate credit cards on our credit card comparison page.

Verdict

If you’re looking for a fast application and approval process for a truly virtual card, the MONEYME Freestyle Virtual Card is – virtually – your only choice. It has the benefit of a possible interest rate (depending on your credit rating) which is better than many of its competitors, but bigger spenders may find the maximum credit limit quite low.

The combination of annual and monthly fees can work out to be quite expensive for the highest credit limit, but almost free if you want only a low credit limit and plan to use the card only rarely.

And perhaps the best feature is the flexible credit assessment procedure, which means that a low credit rating need not deter you from applying. If you’re approved, you’ll be allocated a manageable credit limit and repayment structure, and be given the opportunity to improve your terms and credit rating by using your card responsibly.