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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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This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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