Credit card comparison made simple
"With hundreds of credit cards on the market offering a dizzying array of rates, fees and features, finding the right product for your spending habits and financial situation is challenging. Here at Credit Card Compare, we want to make it easier to cut through these complexities and provide Aussie consumers and businesses a credit card comparison service to find their next credit card.”
David Boyd,CEO at Credit Card Compare
What is a credit card?
A credit card represents a banking instrument that offers a pre-approved credit limit by a financial institution, enabling expenditures and bill payments. Issuers typically provide it in dual formats: a tangible card for physical transaction needs and a virtual version for seamless online usage.
How credit cards work
Credit cards work on a principle of borrowed financial capacity from a bank. A credit card facilitates the acquisition of goods and services like fuel, foodstuff, and utility settlements, positioning itself as a viable substitute to direct cash or savings through a bank card.
Credit cards are issued with specific spending caps, tailored by individual eligibility and vary across different offers and financial entities. Borrowers must settle expended credits, with accruing interest applied to any residual amount monthly.
Types of credit cards to compare
Banks and alternative financial institutions in Australia offer numerous credit card types. It is advisable to assess various options, considering their interest rates, charges, and additional agreements and conditions*. Here is a brief list of the typical types of credit card available.
- 0% purchase credit cards: These cards permit purchases without accruing interest, provided the balance is fully repaid within a specified no-interest timeframe.
- Balance transfer credit cards: This option involves transferring an existing credit card balance to a new card, usually attracting a low or zero per cent interest rate for a predetermined duration.
- Cashback credit cards: Like reward cards, cashback cards accrue 'points' with each purchase. However, unlike rewards cards, which allow for point redemption for vouchers and travel, cashback cards let you convert points directly into cash.
- Frequent flyer credit cards: With these cards, every spent dollar earns points redeemable for travel and lodging costs, depending on the issuer. For instance, partnerships might exist with Qantas frequent flyer scheme, Virgin's Velocity program, or American Express Travel.
- Low rate credit cards: Such cards are characterised by their reduced interest rates, especially concerning the 'purchase rate,' which is the rate applied to the balance due on your card after the billing cycle.
- No annual fee cards: To attract new clients, issuers might eliminate the annual fee, typically for the initial year. It is crucial to verify the subsequent annual fee, if applicable, following the introductory no-fee term.
- Reward credit cards: These cards reward you with points for every dollar spent, with opportunities to earn extra points when shopping at specific stores associated with the card issuer. Points can often be exchanged for gift vouchers at various retailers and supermarkets or for booking flights and accommodations.
We compare many other credit card types suitable for self-employed people or your business, first-timers, pensioners, and students.
Credit card networks
In addition to the various types of credit card, there exist several networks that provide the infrastructure for credit card payments.
- American Express
- Diners Club
- Mastercard
- Visa
None of these credit card networks are Australian-owned.
How to compare credit cards and their features
When assessing credit cards, consider not just the card types, like Rewards versus Low Fee cards, but also their inherent characteristics*. Below is a concise enumeration of essential features for comparison:
- Purchase (interest) rate: The interest rate applied to your card's remaining balance after each billing cycle. Rewards cards often have higher rates than low fee cards.
- Honeymoon (or introductory) interest rate: Choosing a card offering '0% interest' usually means no interest for a predetermined timeframe. It's wise to verify the subsequent interest rate after this period.
- Interest-free days: It refers to the period when no interest is charged on purchases. Typically, these days are fixed within your billing cycle, not starting at the time of purchase.
- Fees, which may include: Annual or monthly fees, fees for participating in rewards programs, fees for late payments, cash advance fees, overdraft fees, and charges for international card use
- Minimum credit limit: The minimum credit offered by a bank or lender. Minimum limits vary by card, ranging from $500 to $6,000, based on the card, the issuer, and your eligibility.
- Rewards program: Certain cards feature rewards programs like AMEX, Velocity Frequent Flyer or Qantas Frequent Flyer rewards. Choose a card whose rewards scheme benefits you.
- Points rates: For rewards cards, this indicates the points earned per dollar spent
- Bonus points: Some rewards cards offer sign-up bonus points, redeemable for retail vouchers.
How to manage credit card debt
One of the main problems with credit cards is that it's possible to get into debt that's hard to get out of without concerted effort, but there are practical steps to avoid this and use a credit card responsibly.
- Pay in full: Whenever possible, make payments in full each cycle before interest accrues. Consider lower-limit cards to encourage manageable spending.
- Avoid compounding debt: Start with reasonable initial limits. Temporarily switching to debit transactions can provide a needed spending reset.
- Seek help if needed: Reputable charities like the National Debt Helpline offer anonymous assistance in creating workable budgets and discussing card obligations.
- Talk with your lender: Issuers may permit structured payment plans allowing large yet navigable debt to be repaid over a more appropriate timeframe. It's best to contact them early.
Do you even need a credit card?
"Don't rush into it if you aren't sure about whether you need a credit card or not. Take time before making an informed decision."
David Boyd,CEO at Credit Card Compare
Credit cards require financial diligence but when managed responsibly can unlock useful benefits from rewards points to consumer protections. However, borrowing beyond your means can risk credit rating damage and spiralling debt. Before deciding, here are some questions to ask yourself.
- Do I have the discipline necessary? It's easy to overspend when you have credit available on a card.
- Can I pay off the balance in full each billing cycle? Interest-accruing balances can start to pile up.
- Am I financially stable enough? If your income is in doubt, a credit card is probably best avoided.
