Q Card & Q Mastercard Review

What Every Existing and Prospective Q Card and Q Mastercard Customer Should Know

Updated March 2018

TLDR Review Summary of Q Card

Q Card offers generous interest-free and payment holiday periods on purchases, but to avoid higher-than-credit-card interest rates, the balance due MUST be paid off before the end of the interest free period.
The Q Card effectively combines a traditional "store card" with "hire purchase" by being accepted at thousands of shops all over New Zealand. But it's not a credit card.
The true cost of "interest free" is not $0. You'll need to pay upfront setup fees and annual account fees.
The standard interest rate is 25.99% p.a, and a number of fees apply to the card which can make it an expensive finance option if you already have trouble paying bills on time .
At least 160,000+ New Zealanders have one; its closest competitor is the GEM Card.
In 2016 Q Card's owner FlexiGroup introduced the Q Mastercard, a credit card version of the Q Card. This operates the same as the Q Card with the added benefit of global acceptance in any retailer accepting Mastercard. We have reviewed the Q Mastercard in addition to the Q Card, as no new Q Cards have been issued since August 2016. Existing Q Card holders can continue to use their Q Card as normal, or choose to migrate to a Q Mastercard account.

Our Review
In this guide, we outline the way a Q Card works, the fees, interest and default fees a cardholder is subject to, an overview on in-store and online purchases, as well as tips for best use. We also outline the Q Mastercard, which operates in a similar way to a Q Card with regards to interest-free offers, fees, interest rates and insurance.

Please note: MoneyHub is not a Financial Adviser, and this guide has been published to outline the positive and negative features of using a Q Card and Q Mastercard as a means of making purchases.

What We Cover

Q Card - the Basics

To make things clear, a Q Card is not a credit card, but similar to a store card. You can only use a Q Card at store "partners", such as Farmers, Mobil, House of Travel etc.
There is a standard interest-free and payment holiday period of 3 months. This means purchases made will not require a payment or incur interest until the end of the third month after their purchase. However, many merchants accepting Q Cards offer specific deals which can extend the interest-free term to 12, 18 and even 24 months on certain eligible purchases.
Monthly minimum repayments are either 3% of the balance owed, or $10 (whichever is greater). Q Card customers also have the option of repaying with fixed instalments.
Customers are also offered a range of insurance policies covering repayments, the damage/loss of purchased goods and life/family.
Q Card was previously owned by Fisher & Paykel Finance Ltd. In 2015 this changed when FlexiGroup, an Australian company, purchased the business. We have not noted any changes in the operation of Q Card since this happened, other than the introduction of the Q Mastercard, which we review below.

Q Card: Claims & Reality

We Examine the Claims made by Q Card:

Claim 1 - "Q Card Is Welcome At Thousands Of Stores Around New Zealand"
Is it True?
Yes. There are numerous retail partners who accept Q Card as a form of payment. These include House of Travel, Mitre 10, JB HI-FI, Rebel Sports, Briscoes, Lumino Dentists etc.

Claim 2 - "(Cardholders) enjoy 3 months no payments and no interest on every Purchase made with your Q Card in store or online. And there’s no minimum spend!"
Is it True?
Yes. Q Card offers the 3 month term as standard on any purchase. No exceptions.

Claim 3 - "Q Card offers access to Long Term Finance deals in-store at thousands of participating retailers throughout New Zealand".
Is it True?
Yes. Beyond the standard 3 month term, retailers can offer interest-free periods of up to 24 months. It is retailer and offer-specific; understand that if you see a "12 months interest free with Q Card" deal in one store, it may not apply in another.

Q Card - 16 Essential Must-Knows

Paying off a Q Card is different from a credit card

Unlike a credit card, a Q Card offers two methods of repayment:

Q Card "fixed instalment plan": This is exactly as you would expect - any purchase you make is repaid over fixed instalments during an agreed term, and will be either interest-free or interest-bearing. The instalment and repayment terms are set by the retailer you purchase from, and payments occur on a monthly basis.
Q Card "flexi payment plan": This is different to the fixed instalment plans - the purchase you make does not need to be repaid in fixed instalments. Instead, there is an ongoing requirements for minimum monthly repayment once the payment holiday and interest-free period is over. With a Flexi payment plan, a customer can pay as much or as little as they choose, with 3% or $10 whichever is greater) being the minimum requirement. This means that you’ll be paying interest on the 97% of the balance that isn’t repaid.

Payment options
Q Card offers five ways to make payments:

Direct Debt – permitting either minimum payment, a specific regular payment or the total Q Card balance owed
Internet Banking – Q Card is listed as a payee under all New Zealand banks.
Phone Banking – any bank will set up Q Card as a payment party.
Automatic Payments - for fixed payment weekly, fortnightly or monthly from your bank account.
Cheque (although this can delay funds from clearing for at least 5 working days, so you would pay interest on any interest-incurring balance)

Everything you buy is entitled to three months interest free, with no repayments

This is the standard offering from Q Card. It's a generous deal which is financially savvy if you can pay off your balance in full when it's due. No credit card offers such generous terms, and the GEM Finance credit card only kicks in on purchases over $250.

If you can't pay off the balance, you'll be paying an interest rate of 25.99% p.a. until you clear it. To put it in dollar terms, if you have a $4,000 balance owing, you'll pay $85 a month in interest in the first month and it will then decrease every month as you pay down the balance. New purchases on the card will be entitled to the interest-free period. We talk about interest in detail in point 4 below.

"Security Interests" are registered on goods you buy

Q Card takes a security interest over the credit advanced to you whilst there is any money outstanding. This security interest attaches to all property that you purchase using your Q Card. This is different to how a credit card works, and it’s important to understand why this matters. Q Card has taken a security interest over the goods you purchase, registering a security (at a fee, paid by you) on the Personal Property Securities Register (PPSR). This security interest gives Q Card the right to repossess and sell the secured property if you breach your obligations, i.e. fail to make repayments.

From 2018, Q Card is no longer registering goods purchased under the PPSR and any existing registrations will not be renewed.

PPSR differs from a credit card purchase, including the Q Mastercard, where the debt is unsecured. This means if you bought a TV with a credit card and then later didn’t pay your credit card bill, you’ll still keep your TV.

You'll repay the balance of your Q Card at a minimum of 25.99% p.a, and it's added to your bill daily

It's important to understand the interest rates charged by Q Card - they're almost twice as high as a low interest credit card and keep you in debt unless used wisely.

Interest Rates

Base Rate – applied to all purchases: Q Card charges a standard interest rate of 25.99% p.a. During specific promotions, retailers and/or Q Card itself may offer a lower interest rate for a particular purchase or an extended payment holiday period. However, this is rather rare and it’s more likely the number of "interest free months" will be extended rather than the interest rate being discounted. Interest charges are added to your Q Card account balance monthly but calculated daily.

Interest is charged daily
Q Card charges interest on any purchases that have not been repaid before the end of their interest-free period. The standard 25.99% interest rate applies, but some purchase plans may have a lower interest rate than the standard rate. Q Card accrues interest daily, with the total for the month appearing on your statement.

If you have trouble paying bills, read on:
MoneyHub has a real concern that Q Card’s low 3% minimum payment amount, coupled with its high interest rate, could keep cardholders in debt far longer than what they might expect. Specifically:

The 25.99% annual interest rate compounds on an account daily, with repayments processed monthly.
An account holder with a $4,000 balance, making consistently monthly minimum payments of $120 (3%) will pay $1,000 of interest over one year and still be left with around $3,400 to pay.
This cost is calculated before standard account fees and late payment fees if a payment is missed.

Miss a Payment and FEES will apply

Q Card has a number of fees when it comes to defaults. We've made them clear below so cardholders know what they could pay if things go wrong:

Default Fees

Default Stages – Q Card allows for four defaults before your account is elevated to a collections agency.
In every one of the four notification stages, there is a $15 fee charged each time the cardholder fails pay the minimum repayment. Your account will be marked as “overdue” until balances are up to date. There are four stages of arrears and an overdue letter is sent at each stage of the arrears process.

Q Card also charges annual fees, as well as other account fees

There are a number of account and administration fees, outlined below:

Account fee - $50 per year. Q Card charges customers $25 every six months to administer the card, similar to the fee you may pay to have a credit card.
Advance Fee - $35 per transaction: This is a fee charged when customers make a new Long Term Finance transaction with a Fixed Instalment Plan or Flexi Payment Plan and are detailed on the sales voucher/receipt. The Advance Fees are calculated according to the costs incurred in processing and documenting the advance, so if it's a low value purchase you could pay less than $35
Variation of terms fee - $16.50 per change per repayment plan. This fee is charged if you wish to change the terms of your credit arrangement. For example, you wish to move from fixed repayment schedule to flexible repayment for a TV purchased, the $16.50 fee will apply.

The True Cost of Interest Free
It's important to keep in mind the true cost of "interest free" is not $0. You'll need to pay upfront setup fees and annual account fees. For example:

If you buy a TV with 24 months interest free for $1,000 you'll pay a $35 setup fee and two years of Q Card annual fees ($50/year), so your purchase will actually cost $1,135 (~11% more than the store price).

Q Card charges fees for non-standard services

We've included the fees and free services that apply for non-standard requests and services:

Cancellation fee: If you cancel a repayment plan, there is no fee.
Early repayment fee: if you pay off your unpaid balance under a fixed instalment plan, there is no fee.
Refund of balance: If you ask for any money overpaid on your Q Card to be returned to you, there is no fee.
Statement reprints – $7.50 for up to 5 Statements, then $1 per Statement thereafter. This fee covers posting requested statements to your address
Card Replacement: $10 – if you lose your Q Card and need a new one to be sent to you.

When you make a payment, it’s is apportioned to pay off your interest-incurring purchases first

Q Card operates an "order of priority" when you make a payment. To outline where a payment goes, we’ve list the order below.

First: The money will be pay off any overdue amount (i.e. any arrears/missed payments) as these balances are charged the highest interest.
Secondly: The money will pay off any balance due on the “Fees and Miscellaneous Plan” – this is where all the fees go, including account fees and insurance fees. So if you have any of these, they’ll be paid next.
Thirdly: The money is applied to any balance due on repayment plans in order of the highest interest bearing first.

Q Card states that when making a monthly payment the “system” ensures that the minimum payment for each interest-incurring purchase is met. This is to make repayments the most cost-effective.
It does this by splitting your payment across all plans that require an amount to be paid for that month.
If you decide to specifically pay one purchase and not others, you will need to make sure you know the status of your other purchases so you do not pay interest unnecessarily.
Q Card requires you to ensure your minimum payment (3% of the closing balance due) for all plans has been covered before payment is made for a specific purchase. Furthermore, only amounts that exceed the monthly minimum due can be directed to a specific plan.

Example:

The minimum repayment is $100
Your payment is $120 ($100 of the payment will be split to meet the minimum due on all plans)
You can direct that extra $20 to whichever plan you like.

Insurance Premiums are on a "need to know" basis

Q Card offers a range of insurance options. Our view is that none of these are necessary for standard Q Card use. Further to this, Q Card does not offer any pricing details on its website for all but one insurance policy, which we have detailed below.

You can’t withdraw money on your Q Card

This may seem obvious, but we thought it’s useful to note - a Q Card is not an EFTPOS card and it's not a credit card either, meaning you won't be able to check the balance without calling or checking online.

Financial Hardship? Q Card is legally obligated to assess your situation

If you find yourself struggling to meet or keep up with payments, you’re legally entitled to apply for a "financial hardship" consideration. This lets you inform Q Card about your financial issues and how repaying your balance is causing financial difficulty. Our debt help guide has more information and sets out template letters for such applications.

You’ll be charged fees even if you don’t have a balance to pay

As Q Card is a revolving credit facility, you'll be charged $25 every six months for the administration of the facility. This annual account fee is payable even if you don’t have a balance owing. Fees are also subject to a 25.99% interest rate as well as arrears fees for non-payment, so make sure to pay 100% of the amount when it appears on your closing balance.

You can’t use a credit card to make Q Card repayments

This is specifically prohibited as Q Card states that paying credit with more credit encourages bad habits. However you can apply for a balance transfer (see 14. below).

Most banks’ Balance Transfer credit cards accept Q Card balances

The good news is that if you’re stuck in a cycle of 25.99% interest rates on balances that never seem to clear, our guide to balance transfer credit cards outlines the best offers currently available. You’ll need to apply with a bank you’re not currently with, and if you get approved, your Q Card balance will reduce by the amount you’ve been approved to transfer.

You can pay off the entire balance at no fee

If you want to clear a balance all at once, you can do this without being charged a fee. Q Card requires you to obtain a “Pay Off Quote” over the phone. You can then provide an expected payment date and get an estimate of the final balance. Once paid, your Q Card will have a zero balance.

Your balance owing can go ABOVE the set credit limit

If interest charges and/or fees are made to your account while the balance is at or near to the credit limit, your credit limit can be exceeded. Q Card does not charge a fee for breaching the credit limit, but it also means purchases will be declined until payments are made to bring the balance below the credit limit.

Standard Q Card statement, indicating the difference between the closing balance (red) and minimum payment due (orange)

Interpreting a Q Card statement – what you need to know

The largest font on the Q Card statement refers to the "minimum payment due" (indicated in orange), but it's important to know that you'll pay interest on the amount of that no longer has Interest Free terms of the "closing balance" (indicated in red above) you don't repay.

Let's see how this works.

In the example above, if only the minimum payment of $85.20 is made, then the remainder of the closing balance would be $3,422.22.
With the Q Card interest rate set at 25.99% p.a., the interest charge for the month will be $74.11
For this reason, the "minimum balance due" poses a risk of keeping cardholders in a debt trap.

Your "total balance due" is calculated in the following way:

Fixed Installment Plans Balances: These require the set monthly installment amount as specified on the Fixed Installment Contract. If you've purchased something and you agreed with the retailer to repay it in fixed amounts, this is what you'll see. i.e. You bought a $2,400 TV and agreed to repay it at $200 every month for 12 months.
Flexi Plans that have come out of the payment holiday period: If you've used your Q Card for purchases with the standard "3 months interest free/no repayments" terms, you are required to pay at the minimum 3% of the total balance due. For example, if you bought a $2,400 TV with 3 months interest free/no repayments, on month 4 the closing balance would be $2,400 but your minimum payment due would be 3% of this, approx $72.
Fees & Miscellaneous: Cardholders are required to repay the full amount of the fees balance each month

What We Think

As with any credit card, paying off more than the minimum balance will reduce interest costs in the short and long term.
Q Card has historically received millions in interest charges every year - if you're unlikely to be able to repay the balance, consider a balance transfer credit card - you can move Q Card debt to 0% deals for up to 12 months.

Q Card Insurance

Q Card offers a range of insurance deals, with a focus on repayments, funeral and death.

1. Q Card Repayment Insurance
What is it and how much cover is provided?
This insurance covers your Q Card repayments should you be unable to earn an income due to accident, illness, bankruptcy or redundancy. Cover is set at the lesser or your closing payable balance or $20,000.

How much does it cost?

There are two classes of premiums – 89 cents per $100 of your monthly closing balance when a payment is due, and 63 cents per $100 of your closing balance when you’re on an payment holiday period.
To calculate the monthly fee, let’s take two examples. You owe $3,000 on a Q Card, with $2,000 relating to a TV and $1,000 relating to a holiday. Both are in a payment holiday period as they’re relatively recent purchases.
You will pay $18.90 per month, or ~$240 per year if the balances remain the same (using the rate of 63 cents per $100).
If the purchases now require payment, your monthly insurance cost would be $26.70 or ~$324 per year (using the rate of 89 cents per $100)
If you choose to pay the insurance with your Q Card, the insurance cost will also be subject to interest being charged if the balance was not paid.

Are there any limitations in the fine print?

Yes, quite a few. It’s important to note that in the event of redundancy or temporary disability, you’ll only be able to claim if you have a balance due. That means if you’re still within a no-repayment and interest-free period, you won’t be able to claim and will have to wait until repayments are required to make a claim.
If you’re no longer unemployed or disabled at the time you have a balance due, you’ll need to make the repayments as usual as the insurance will not be valid.

So, what exactly do I get?
For every Flexi Payment Purchase and Standard Q Card Purchase that form part of your Closing Balance

Temporary Disability: You can claim "3 times the monthly Minimum Payment" for up to 3 months. If you meet the criteria after 3 months you be assessed under "Permanent Disability".
Permanent Disability: You'll be covered for the closing balance (i.e. the entire amount of your Q Card you're liable to pay), less any "Temporary Disability" benefits already paid, up to a maximum of $20,000.
Redundancy: You can claim "3 times the monthly Minimum Payment for up to 6 months" and total benefits paid are limited to $20,000. This is either 3% or $10 (whichever is the greater).
Bankruptcy: You can claim up to a maximum of $20,000 if you're declared bankrupt.
Death or Terminal Illness: You can claim up to $20,000 on the date of death or date of diagnosis of a terminal Illness.

Important - Temporary Disability and Redundancy

Because the repayment insurance policy for both Temporary Disability and Redundancy is limited to 3 times the minimum payment due (for up to 6 months) and will never pay more than that, interest on the unpaid portion of the balance due will be added. A policy holder would see their overall debt grow at 25.99% per annum unless additional payments were made.
Our view is that for these policies, a more suitable name would be "Minimum Repayment Insurance" rather than "Repayment Insurance".

2. Q Card Life, Funeral and Accidental Death Insurance, provided by Cigna Insurance. These are as followed:

Life Insurance – pays out a tax-free lump sum payment upon the death of the policyholder.
Funeral Plan – Q Card offers “guaranteed acceptance” if you're aged between 55 and 75 and covers all direct and related costs for the policy holder’s funeral.
Accidental Death – pays a lump sum if the policyholder dies from an accident, with guaranteed acceptance for anyone under 70 with no pre-existing conditions.

We have chosen not to review these specialist insurance policies as they are not core to the Q Card offering.

Q Card Stores and Retailers

Q Card is accepted at thousands of stores all over New Zealand. The best indication of the range of retailers is found on their Storefinder PDF but the list is incomplete, and the QCard Storefinder is a better tool.

Q Card Mastercard

Q Mastercard works in exactly the same way as a Q Card, with two additional benefits:

A Q Mastercard will be accepted as a method of payment anywhere Mastercard is accepted. This means you can also use it overseas, whereas the Q Card is only accepted as participating retailers in New Zealand. All purchases, including those at non participating retailers in New Zealand and overseas, are three months interest free, with no repayments.
You can withdraw cash on your Q Mastercard (this is not possible with a Q Card). However the cash advance interest rate is applicable from when the withdrawal is made.

With those benefits come two additional fees:

International Transaction Fee - 1.4% of the total of the converted balance to New Zealand Dollars (which are converted at a rate of exchange fixed set by Mastercard). The fee is charged by Mastercard directly.
The Cash Advance Rate - 27.25% p.a.

Long Term Finance
Q Mastercard, like the Q Card, is eligible for specific deals promoted by Q Card which can extend the interest free term on certain eligible purchases.

Q Card and Q Mastercard - Our Conclusion

If you have a history of paying off credit cards, a Q Card or Q Mastercard can be a useful addition to your wallet. But make sure to tick the "Pay Closing Balance" box on a direct debit form to avoid any interest charges.
If you have trouble paying bills on time, you will probably want to avoid the Q Card and Q Mastercard. The interest rate is above-market (25.99% p.a.) and you could easily find yourself stuck paying barely more than the interest charges on a month to month basis.
We are cautious of supermarket retail partners, including Countdown, New World and PAK'nSAVE, offering Q Card deals - similar to any credit card, we take a view that buying groceries with 3 month interest free deals could be more expensive if the purchases are not paid off when they are due.
We don't think the insurance is good value, and the cover for redundancy or temporary disability is particularly poor to the point where it may not even be worth having.
The number of merchants offering interest-free deals beyond the standard 3 months is significant.
Cardholders should remember that the retailer offering an interest-free deal may not be the best deal overall. We suggest you shop around and avoid limiting yourself to Q Card retailers. For example, an outdoor furniture set bought at a non-Q Card retailer may be cheaper upfront.