There is a new credit card that is starting to come into the Australian market, the hybrid card or the current account credit card.
Essentially the card is a combination of a debit card a credit card. Like a debit card it has a direct link to the transaction account of the card holder. In the same way as a credit card it has a pre-approved ability to borrow money on the card.
In most cases when the current account is close to zero and a debit card is presented then one of two things will happen. Either the card will be refused, or the card user will go into overdraft. There are times when the card user will not have an approved overdraft facility, and will end up paying a hefty fee for going into an unauthorized overdraft.
A hybrid card has a credit limit that is pre-approved and so when the credit card is close to being overdrawn then the credit account is accessed, rather than sending the current account into overdraft. The credit limits tend to be lower than those on a normal credit card as they are accessed less.
In a way this is the best of both worlds as no large debt is allowed to develop while the transaction account is in credit while the account does not go overdrawn and the credit card is not refused. However there are some downsides to this arrangement.
The first is that the account does allow a card holder to go into debt without noticing this. Most debit cards have the ability to stop the card being used if the transaction account goes into overdraft territory.
There is also the fact that the credit card interest is likely to be higher than any approved overdraft interest. In the case of unapproved overdrafts, particularly for small amounts this is unlikely to be the case as the fees are likely to considerably increase the effective interest rate (the interest charged added to the fees charged).
Like both debit and credit cards the hybrid card will have the ability to be used wherever the credit card network symbols are shown. It also has the ability to be used for internet, mail order and telephone transactions as well as having any fraud prevention measures and zero liability guarantees that would normally apply to a credit or debit card.
