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Should you get a credit card during uni?
As another year of university starts again, many young Aussies may be asking themselves how they’ll be able to afford the costs that come with schooling. One option students may turn to is taking out a credit card. But is this really the best option for your schooling years?
Are you planning on renting a car soon for a holiday or road trip? Don’t get stung paying the car rental excess insurance - at least not before you check your credit card policy.
Many credit card providers offer complimentary excess insurance on rental cars as an added perk.
What is car rental excess?
Excess is the agreed amount of money that you would be liable for if there was any damage to your rental car during the rental period. The amount of excess can put consumers in a tricky position, tacking on hidden fees and rates to what may have appeared from the outset to be an affordable rental car.
For example, you may find a rental car rate that you are happy with, only to discover that it includes insurance with a $4,000 excess. This means that you would need to pay $4,000 out of your own pocket to cover the cost of any damage to the rental car.
Here’s the kicker - you can reduce your car rental excess, for a price. This means paying more to hire the car in the first place, turning your affordable rate not-so-affordable in a very short space of time.
How can my credit card reduce my car rental excess?
Many credit cards offer free car rental excess insurance as an added benefit.
This benefit usually comes bundled with other travel insurance perks, such as lost or stolen personal property, medical and hospital and travel cancellations.
What should I look out for in a credit card with rental car excess insurance?
It’s important to remember that your credit card doesn’t automatically cover you for rental car excess. Rather, your credit card provider may offer a complimentary insurance policy that could partially or entirely cover the cost of your car rental excess (should you need it).
Like all insurance policies, it’s important to find out the policy name, and read the product disclosure statement (PDS) before you rely on it. Many of these insurance policies will not cover your car rental excess in certain situations, such as if you violate the terms of the car rental agreement or if the cardholder is not driving the car at the time of the damage or accident.
How do I find a credit card with free car rental insurance?
When comparing credit cards, look out for phrases such as “rental vehicle excess insurance”. You should also look out for cards that are marketed as a travel credit card, or advertise travel insurance perks or benefits. Rental car insurance can usually be found bundled into a more comprehensive travel insurance policy, and less often as a standalone perk.
As with all credit cards, make sure to weigh up the cost of the annual fee and interest rate compared to the perks or benefits before committing. If everything else adds up, you may have found a way to reduce your car rental excess without paying through the nose for it.
^The best credit card for you may not be the best option for somebody else in different financial circumstances. As well as looking at the excess insurance options, it's important to consider the other features and benefits from a variety of credit card providers to ensure you're receiving value. If you're not sure which credit card could be the best option for you, consider contacting a qualified financial adviser.
When managed properly, credit cards can be a convenient way to access cash and reap rewards. As convenient as they can be, it’s important to keep on top of your repayments so you don’t end up paying more in interest than the item originally cost. Each month, you’ll get a credit card statement detailing how much you owe and how long it will take to pay off the balance by making minimum repayments. If you only make the minimum repayments, it will take you years to pay off your outstanding balance and add extra costs in interest charges. To avoid any extra charges, you should pay the entire bill.
Credit card interest can quickly turn a manageable balance into unmoveable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.
The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.
This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.
Many people want to know how to get a free credit card. The reality is that all credit cards come with associated costs when used to make purchases – even if it’s simply the cost of making repayments.
However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. You may be able to cut down on the usual costs associated with a credit card by comparing and choosing the right card to suit your requirements.
Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.
Credit cards can be useful, provided you understand the risks. If you’re wondering about how to make a credit card online application, here are some steps to follow:
- Test the market – Many credit card options are available online. Compare providers by fees, interest and perks to ensure you’re getting the best deal.
- Complete the application – Once you’ve selected a card, head to the provider’s website and complete the online credit card application form. Forms vary by providers.
- Provide details – Most cards require you to meet age, residency, income and credit status condition, and you need to provide details like a bank account statement to prove this.
- Review details – Ensure the information you’ve entered is correct.