If you’ve ever opened an Australian newspaper or sat through any sort of Aussie football match, you’d have seen ads from Harvey Norman or The Good Guys yelling at you that they offer 50 months interest free on a Latitude GO Mastercard.
Normally you shouldn’t buy things you can’t afford to pay for up front except for a house and maybe a car, but I used to like using interest free deals even if I had the cash up front for the item so I can keep cash in a savings account earning interest.
Unfortunately, since Latitude added a $10.95/m account keeping fee to their GO Mastercard in July 2024, it’s only really worth bothering if you’re spending at least $7,000 or more. They even add the fee if your card balance is $0!
Take for example a $5,000 purchase - $100/m for 50 months, plus the $10.95 service fee. Over 50 months the total you’d have spent is $5,547.50 but if you kept the $5,000 in a HISA account instead earning 4% interest (you can get higher, but I doubt interest rates will still be around 5% in 3-4 years time!) and autopaying $110.95 each month, all you’d earn in interest is $425.98. You’d actually be losing $120.52 over the 50 months.
Even at 5% pa interest, you’d have made just under $2 in extra interest over 50 months. Hardly worth it.
But lets say you’re spending $10,000 (decking out a whole house with appliances perhaps) - $210.95/m inc account fee - you’d have $353.65 left in the savings account after 50 months if you can maintain at least a 4% p.a interest rate. Not as amazing as it used to be, but still, free money.
This financial hack also only works now on 50 month repayment plans. Practically anything on a 24 month plan (e.g: Apple gear, or stuff at JB Hi-Fi) ends up barely breaking even or most likely, losing money.
Shout out to this calculator for making the savings account interest minus a fixed monthly withdrawal super easy to work out!
RIP to the Latitude GO Mastercard. It was a great deal while it lasted, but the $10.95/m service fee really makes it useless unless you have an investment you reckon will earn 7% or more interest with almost no risk - which if that’s the case, please let me know so I can put some money in!