Why you need to compare credit cards
You wouldn’t buy the first car you saw without looking under the bonnet and doing a little research first, so why should it be any different for credit cards?
Credit card comparison is one of the essential ways that consumers can protect themselves from higher than average interest rates and fees. By comparing credit cards, you can ensure you’re choosing a credit card that suits your financial needs and budget.
There are a multitude of different factors that can influence how much you’ll pay for your credit card, including:
- Credit card interest rates
- Balance transfer introductory rates
- Credit card rewards and perks
- Credit limits
- The number of interest free days
- Overseas credit card fees
- Ongoing fees, such as annual fees and late fees
Not all credit cards are created equally, so before you take out a new credit card, make sure you’ve made a thorough comparison of all the cards on offer.
What credit cards can I compare?
There’s a wide range of card types available for credit card comparison, with the most popular types being:
Credit card type
Low rate credit cards
Offer consumers a lower interest rate than competitors. No-frills product (minimal perks and/or bonuses – if any).
Low fee credit cards
All credit cards come with an annual fee, however some providers offer special low annual fee credit cards to entice customers. Keep an eye out for potential hidden costs and fees.
Balance transfer cards
Allow you to move a debt balance from one financial provider or product to another with a lower or no interest rate (for a set period of time) to help you pay back your debt.
Rewards credit cards
The money you spend earns you rewards points that can be redeemed for exclusive discounts or offers through rewards points systems.
Frequent flyer cards
Similar to rewards credit cards, however you specifically earn points to be exchanged for frequent flyer rewards (such as discounted flights, upgrades, travel and medical insurance etc.)
How do I compare credit cards?
- Look at the type of credit card
How you plan on using your credit card will drastically impact how you compare it against other credit cards. If you’re looking for a no-frills option without the extras like travel insurance, you may want to consider low rate or low fee credit cards. However, if you’re a big spender, or you want to take advantage of rewards points, premium credit cards or rewards credit cards may be better suited to you.
- Look at the credit card rates
Another important way to compare credit cards is to look at the interest rates, including purchase rates, balance transfer rates and rates for cash advances. Low credit card interest rates tend to sit in the 10 – 12 per cent range, however these rates can be higher or lower depending on the type of credit card.
- Look at the credit card fees
It goes without saying that the more fees your credit card stings you with, the more it will cost you in the long run. While it’s difficult to avoid an annual fee, there are a range of common credit card fees that you can find lower cost options for, or avoid all together.
These include late payment fees, foreign currency conversion fees, foreign ATM usage fees, dishonour fees, over-the-limit fees, ATM cash advance fees and replacement credit card fees.
- Comparison tables and tools
The easiest way to perform a total credit card comparison is to use credit card comparison tools. RateCity.com.au provides Australians with a range of easy to use comparison tools, such as comparison tables and balance transfer calculators.
Comparison tables allow you to easily search and filter for the type of credit card you want. The tables then showcase important cost factors such as rates, fees, credit card limits and the number of interest free days, so you can find the most competitive choice for your financial needs and budget.
Credit Cards 101
What are the best credit card deals in Australia?
There are a range of factors that you need to consider when comparing credit cards, and the best credit card for one person may not necessarily be the best for another.
If you’re hunting for the best credit card for you, the easiest thing to do is to utilise credit card comparison tools, such as comparison tables, balance transfer calculators and credit card guides to ensure you’re making the most educated decision for your financial needs and budget.
What are the pros and cons of credit cards?
Credit cards can be a helpful financial resource if you’re disciplined and financially savvy, however, they’re one of the most common ways you can fall into debt if you struggle with self-control or lack a strong level of financial literacy.
There are a number of pros for credit cards, and first and foremost is the easy ability to “borrow” money. When you make a purchase with your credit card, you’re expected to pay back the “loan” at the end of your payment period. If you’re not able to pay off your balance each month you’ll be charged interest, which can quickly grow into debt if not handled responsibly.
Credit cards with rewards systems allow you to grow rewards points or frequent flyer points. Another pro is the ability to exchange points you’ve earned through spending on exclusive discounts and offers, though it’s important to keep an eye out for credit card fees that charge you for the privilege.
Further, if you manage your credit card well it will reflect positively on your credit history, helping you to build a great credit score. If you’re unable to pay your credit card bills, or start to grow too much debt it will reflect negatively, which can be detrimental to your ability to take out loans, rent property, buy a house or even join a mobile phone plan.
- Easy way to borrow money
- Enjoy rewards perks and discounts
- Can improve your credit history
- Can grow debt if poorly managed
- Fees may negate the "free" rewards perks
- Can negatively impact your credit history