Did you get the right credit card with your home loan?

Did you get the right credit card with your home loan?

Remember that piece of plastic your bank gave you for taking out a home loan with them? If you haven’t thought much about the credit card that came with your home loan since you first got it, there’s a chance you may be using the wrong type of card for your spending habits.

The home loan package low down

Many lenders bundle extras, like credit cards and transaction accounts, into your home loan at a reduced rate. These are called package home loans. This packaging is done simply to encourage borrowers to move all of their financial products to the one institution.

These days, lenders are no longer pushing the credit card aspect of a home loan package as much as they once did. This is in response to tougher lending regulations from the Australian Government that were rolled out in the last two years. These include card issuers now assessing your ability to repay the entire credit limit of a credit card within a three-year period before you can be approved.

But some Australians may still have received a credit card when they first got their home loan however many years ago.

RateCity research also shows that paying for these perks will cost you, as the average home loan package rate is typically higher than the average basic home loan rate.

If you’re already paying more for the benefit of having this credit card, you may as well do a little research into whether you’re using the right type of card for your financial needs and budget.

What is your spending profile?

There are obvious risks associated with any credit card, with growing debt being the biggest.

But you may also be at risk of paying too much in ongoing fees, or missing out on earning rewards points, if you’re not using the credit card best suited to your spending profile.

There are four main spending profiles:

  • 1. The Habitual Spender

Do you use your credit card like you would your debit card? Are you regularly accruing interest on your purchases and trying to pay down debt? You may be a habitual spender.

This means you may benefit from a low rate, low-interest credit card so you can try and stay on top of your debts.

Suggested credit card:

  • Low rate low fee credit card
  • 2. The Impulse/Occasional Spender

You keep your credit card in your back pocket as a ‘just in case’ financial tool. You may use your credit card for bigger purchases you otherwise couldn’t afford upfront. Or maybe you’ve only used your credit card while overseas for booking accommodation or rental cars. If you only use your credit card for emergencies or one-off items, you may be an impulse/occasional spender.

In this case, choosing a credit card with low or no ongoing fees might help you to keep those upkeep costs down. Plus, you’re probably not using your credit card enough to earn rewards perks.

If your credit card usage is reserved for overseas trips, it’s worth comparing travel credit cards. They tend to not charge overseas fees and may come with complementary travel insurance.

Suggested credit card:

  • Low rate low fee credit card
  • Travel credit card
  • 3. The Everyday Spender

Do you use your credit card most days and always pay your credit card bills on time each month? You may be the everyday spender.

If you’re avoiding interest charges and regularly using your credit card, you might want to look at cards that reward your spending. This could be through rewards programs, frequent flyer programs or cashback offers.

Rewards credit cards do tend to come with annual fees. If you’re not interested in paying ongoing fees and don’t want a rewards credit card, you may want to look at low or no fee credit cards. As long as you’re maintaining on-time payments, you’re not worrying about interest anyway. The biggest costs you’ll be facing in this instance are ongoing fees.

Suggested credit card:

  • Low rate low fee credit card
  • Rewards credit card
  • Frequent flyer credit card
  • 4. The Big Spender

Do you spend over $5k a month on your credit card? Do you use it for convenience, or to earn rewards points and to game point hacks? Do you also make sure you pay your credit card bills on time? You may fit the big spender profile type.

Big spenders may be in the market for cards that reward them for spending money, such as through rewards programs, frequent flyer programs and cashback offers. Big spenders may also qualify for additional perks, such as complimentary travel insurance, concierge services, and much more.

Higher income earners tend to qualify for higher credit limit cards. These are typically called platinum credit cards. Keep in mind that you may incur higher-than-average fees for the privilege of having a platinum credit card.

Suggested credit card:

  • Platinum credit card
  • Rewards credit card

Finding the right credit card for your spending profile

If you believe the credit card you got in your home loan package doesn’t best suit your spending profile, the best thing you can do is compare your options.

If you want to stay with the same financial institution as your home loan, hop on your lender’s website and take a look at the credit cards on offer. Check out what fees and costs are involved, and make sure you read the product disclosure statement (PDS) before you consider making the switch.

If you want to compare options from other card providers, the easiest way is to use a comparison table. RateCity’s credit card comparison table helps you to compare apples with apples. Filter your credit card search by the type of card you want, and then you can view purchase rates, annual fees and much more to find the right card for your specific needs.

Keep in mind that if you have credit card debt, you can’t just switch to another credit card like you were switching transaction accounts. Work at paying down your debt before you close your current account and make the switch.

If you’re struggling with credit card debt(s), there are resources available. You can read RateCity’s guide to consolidating credit card debt here. There are also free financial counselling services available if you want to speak to someone directly. More information can be found on ASIC’s website.

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Learn more about credit cards

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.

How to pay a credit card

There are a few ways to pay a credit card bill. These include:

  • BPAY - allows you to safely make credit card payments online.
  • Direct debits - set up an automatic payment from your bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.
  • In a branch.
  • Via your credit card provider's app.

Do you need a credit card to get a loan?

You do not need a credit card to get a loan, but you usually need to have a credit history. Without a credit history, a financial institution cannot assess your ‘credit worthiness’, or your capacity to pay off the loan.

If you don’t have a credit card, your credit history can reflect any record of paying off an asset. Without any credit credit history, you’re limited in the type of loans you can apply for. But you may be able to obtain a secured loan against an asset. For more information on improving your credit score, go here

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

Keep in mind that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APR's for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent.
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details.
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible.

How do I apply for a credit card online?