Credit cards are a convenient way to pay for things, but that convenience can come at a cost.
The kind of credit card you should get depends on your spending habits and how you want to pay off your debt.
Choosing the right one can save mean significant savings.
Credit cards have different features to suit different types of spenders and it is important that your credit card matches your spending patterns and financial behaviour.
If you always pay off your credit card in full each month, look for one that offers interest-free days. This means you pay no interest for a certain number of days after making a purchase (for example, 55 days).
These cards may charge higher interest rates and annual fees, but if you pay off your debt within the interest-free period, you’ll avoid paying interest altogether, so the higher annual fee may be worth it.
If you know you won’t be paying your debt in full straight away, consider a card with no interest-free days. You’ll usually pay lower annual fees and less interest, either from the day of purchase or the day your monthly statement is issued.
A recent Canstar credit card ratings report found that a five-star rated credit card for customers that benefit from low-rate cards could get interest rates of 9.78 per cent, while the market average for credit cards is 16.41 per cent.
According to Canstar, if rewards cards are most beneficial to your spending habits, getting a five-star rated rewards card could offer around $52 in value per year after factoring in annual fees and other charges, compared to an average rewards card, which would actually end up costing you $84 per year when factoring in the fees and other charges.
It’s worth shopping around to find the best credit card for you. It might be easy to get a card with the financial institution you normally use, but you could find a better deal elsewhere.
For more information on choosing the credit card that is right for you, visit moneysmart.gov.au.
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