Image by Andres Rueda
Why get a one-size fits all card when you can tailor your credit card to suit your needs?
Even a quick look will show there is a diverse array of credit cards available to you, the consumer. It can be hard to sort through them all and figure out which card is going to best serve your needs. Points, interest rates, rewards, air miles – it doesn’t take long before your head is swimming. Let’s dip a toe into the credit card waters and try to make sense of the various cards available to you.
Low Interest & Balance Transfer Cards
The idea behind these cards is to reduce the amount of interest you pay on an outstanding credit card balance. If you currently owe a lot of money on a credit card at a high interest rate, you should consider one of the 0% balance transfer cards on offer. These cards allow you to transfer your current high-interest debt to a different card and enjoy a period (often 6 or 12 months) of 0% interest. Be aware that many of them now have a transfer fee, often a percentage of the outstanding balance, which will be levied for the transaction. Can you realistically pay off your debt during the 0% time period, and if not, what is the resulting interest rate after that period ends? Also, while the balance transfer may be at 0%, new purchases are usually charged at a much higher rate, so be sure to double check the small print. (Hint: Use our credit card debt payoff calculator to help figure out how long it will take you to pay off your balance)
A low interest card offers a lower than standard rate of interest, either indefinitely or for a set period of time. If there is the possibility that you won’t pay your balance in full every month, this is probably the card for you as it lessens the total amount you will pay for your purchases.
No Annual Fee Cards
There are a good range of cards on the AUS market that charge no an annual fee to holders who don’t spend excessively and always pay off balances every month. A no annual fee card can be a real winner if you can avoid paying this sometimes hefty fee. Before you fill your form in online, question whether the card is competitive on interest rates and if there are any penalty fees for late payment. There are some very good no annual fee cards and if you are offered one it is worth considering them.
Airline & Frequent Flyer Cards
If you spend a lot each month on your credit card, and don’t carry a balance, then one of the frequent flyer cards might see you jetting off around the world on points you have earned through your regular shop and/or business expenses. Most companies that issue these cards either offer you a percentage of your total monthly spend (say 5%) as a cash-back bonus which you can use to book flights, hotels or on a car hire, or they offer say $1.25 for every $1 you spend to be used towards travel costs.
These are great cards if you travel a lot and you pay off your bill in full each month. You also need to spend a fair amount each month to make it worth your while – the more you spend the faster you will accumulate the necessary rewards points. Before you sign up for one, check to be sure the airline carriers and hotels you would actually use are part of the scheme. And review the approval criteria to make sure you stand a good chance for approval.
Rewards & Cashback Cards
These cards work in a similar way – a percentage of your monthly spend is paid back to you at the end of a set period (monthly, quarterly or annually, depending on the card). The difference is in whether you are rewarded with cash credited to your account or whether you receive points towards a purchase. It’s worth shopping around and comparing offers to determine the best fit for your needs.
There is a lot of competition in the rewards card field, so many offer additional sweeteners – interest-free periods, low interest or double/triple rewards. Compare a few of the competing reward credit cards before you sign up for one.
These cards really only make sense if you spend a reasonable amount on your card and you don’t carry a balance for any length of time. Generally, a cashback card requires a good credit rating. If you qualify, and you choose wisely, you could end up with more than just a credit card statement at the end of each month.
Gold & Platinum Cards
Gold and Platinum cards are how credit card companies reward their best customers. They require a high annual spend and a good credit rating. If you fit the criteria, you can look forward to exceptional service and deluxe benefits. Common perks include: free travel insurance, purchase cover, contents insurance and frequent flyer points. Platinum cards often come with a concierge service, airport lounge access, extended warranty cover – depending on the card, that may only be the tip of the iceberg. Generally, proof of high annual earnings is required to qualify for a Platinum card.
These cards are no good for carrying a balance as they often have higher interest rates. There is also an annual fee. However, if you use the extra benefits they offer, it can be well worth the annual cost.
Business Credit Cards
If you run your own business there are many advantages to having a credit card unique to your business. To begin with, it makes you look like a legitimate business rather than a start-up. Also it simplifies your life when it comes to book keeping and paying taxes as all of your business expenses can be contained on one credit card statement. You can also have additional cards (with spending limits) for any staff in order to facilitate purchasing. And, if you pay off your bill every month, you can enjoy the interest free period afforded by a credit card.
Student Cards
Banks are increasingly trying to win over students and there are plenty of cards on offer to Uni students who meet certain criteria. It is advisable to search out the lowest possible interest rate and to limit the amount of credit available to you. For all the benefits of a credit card, without the possibility of going into debt, look at the Visa Debit cards which only allow you to spend money you already have.
Bad-Credit / Good-Credit Cards
For people with bad credit records, it doesn’t necessarily mean that you will never be able to have a credit card; there are some credit providers still willing to lend credit to those with less than stellar credit histories. If you fall into this category it is worth searching one of these cards out. Getting a credit card with a low spending limit, and ensuring you pay off your balance every month, is a great way to begin to rebuild your credit rating. Another option is the Visa Debit card which can be used like a credit card but only allows you to spend money in your current/savings account, which could be invaluable in preventing further credit troubles.
The flip side of this is if you have a good credit history, then the world is your oyster and you should have a range of good credit cards available to you!
Consider Your Options and Compare The Market
It is worth taking a bit of time to think about what you need from a credit card before you tackle the credit card choices available to you. A few questions early on will help point you in the right direction.
Do you have any questions? Leave your questions and comments below.
