How to choose the right credit card?

By Andrew Willink
1 October 2008

When applying for a credit card, many have trouble with the variety of options -Altitude, Low Rate, 55 Day - what’s the difference?  Not many people know the answer to that question, and as a result, a lot of people end up getting a credit card that is not right for them. Each card is aimed to be beneficial for a different type of spender; so we are going to give you an explanation of the benefits of just a few common cards, and therefore help you to choose one that may suit you.

Low Rate Credit Card
The low rate credit card is ideally best for those ‘first timers’.  The low rate card usually offers 55 days interest free, and also a low interest on payments after the initial 55 days. This card is a great first credit card; as it teaches you how to budget, resolutely learning to pay off items within the 55 day period, and avoid accumulating interest.  The low interest also acts as a safety net; if you’re not so great at budgeting initially, and go over the 55 day period, there will only be a small amount of interest to repay. The only downfall to this card is an annual fee, which is usually not waived during the first year.

55 Day Credit Card
This credit card is very similar to the low rate card, as it is an appealing first credit card.  This card also has a 55 day interest free period; however after this, the interest rate is usually quite high.  Therefore this card is more beneficial to those who are unlikely to spend more than what they can pay off in the 55 day period.  This card generally has one additional benefit that the Low Rate card does not often entail; a lower annual fee, which is waived for the first year. Often there are also further incentives to choose the 55 Day card; such as the first 6 months interest free or no annual fee if you spend over a certain amount each year. 

Frequent Flyer Credit Card
The frequent flyer card is ideally created for those who spend a substantial amount of money with their credit card. This card usually offers an interest-free period of approximately 45 days. However the main appeal of this card is the rewards points. This card usually comes with bonus points, and accumulates an additional one point per every dollar spent; moreover the American Express option is offered, which accumulates the points at a higher rate.  Gold and Platinum cards are also available, with added benefits that will generally appeal to frequent travelers. Ultimately, this card is aimed at the high spender because it has benefits that are only significant when spending considerable amounts.  Furthermore, this card often has the additional card holder option; which combined with the appeal of high spending, is beneficial for couples and partnerships. 

Student Credit Card
Finally the student card, offered by most banks, is a low limit card that is appealing as a first time credit card. The limit often only extends to $500, and is most suitable for tertiary students with a low income that would usually prevent them from being able to obtain a credit card. As this card has such a low limit, it is mainly intended as emergency money. By obtaining this credit card, however, the holder can actually build up a credit rating which will further benefit their banking in the future.

Whilst many people plunge into unexpected debt due to credit cards, a problem can often be that they initially acquired the wrong card. There are cards suited for many different needs; high spending, low spending, a first credit card, and emergency money.  The key to getting the best card is simply researching different banks and cards, which can be done on RateCity, where you will be able to find a card that best suits your needs.

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