Choosing your credit card match
From balance transfer cards that can help you ditch debt through to rewards credit cards offering a range of freebies to entice any big spender's appetite, there's never a shortage of plastic to choose from in the bustling credit card market. But what type of card is right for you and what are the features to look for and the fees to watch out for?
We're here to answer those questions in this tell all guide, aimed at helping you choose your perfect credit card match. Starting from the top:
What types of credit cards are available?
As mentioned above, there's plenty of choice when it comes to choosing a credit card. So check out our list of card types below to decide which plastic is worthy of a spot in your wallet:
Low interest rate credit card: If you're the type of person who tends to carry a balance on your card, a credit card with a low interest rate (typically under 14%) should be on your shopping list. While most low rate credit cards require you to pay an annual fee, this cost is likely to be far lower than paying a high interest rate.
Intro rate credit card: Alternatively, you could opt for a credit card with a low rate “honeymoon” period. Intro rate credit cards usually mean you'll get a competitive interest rate (sometimes 0%) for an introductory period anywhere between 3 - 12 months, however once the intro term has come to an end the purchase interest rate will then revert to a higher rate. So if you go for an intro rate card make sure it not only has a competitive “honeymoon” rate but a low revert rate as well.
Balance transfer credit card: Have you racked up some debt on your current plastic? Then you could apply for a balance transfer credit card that allows you to roll your existing debt, over to a new BT card with a low or zero percent interest rate. However, the same principle applies as with an intro rate credit card, as the great BT rate offer will only be available for a set period of time from 3 - 24 months depending on the card. If you still have debt to repay after this period the balance will revert back to the standard purchase rate or even the cash advance rate. So make sure you work out how much you will need to pay each month, using Mozo's debt payments calculator, to ensure you blast the debt within the BT term.
Low or no fee credit card: On the other hand, if you're a borrower who diligently pays your card balance in full each month, your borrowing match is likely to be a low or no fee credit card, which means you pay a low annual fee (or none at all!). You won't need to ensure the interest rate is also ultra-low, because there's no need to worry about being hit with interest when you pay your credit card bill on time each month.
Rewards credit cards: Looking for a card that comes with the bells and whistles of bonus offers, rewards points and complementary features like travel insurance and concierge? Then you're probably in the market for a rewards credit card. Just keep in mind, apart from a high annual fee you'll also incur a higher interest rate, so you'll need to pay the balance in full each month to avoid interest charges that could negate the value of the rewards. Use Mozo's Rewards Revealer tool to find the perfect card for your spend.
Platinum credit cards: Want to supersize the amount of rewards you can earn and the freebies you gain? A platinum credit card generally comes with all the goodies of a rewards card but just more of them, as you'll gain bigger bonus points, more rewards points per dollar spent, exclusive entertainment offers and of course freebies like inbuilt travel insurance, concierge and purchase protection. But of course the catch is higher rates and fees, so platinum cards are really suited to people who never miss a payment and always pay their balance in full each month. You'll also need to meet some strict lending criteria to get this plastic in your wallet, like a minimum income amount.
Travel credit cards: Holidaying overseas is expensive enough with everything from flights to accommodation to factor into your budget - so don't add pricey currency conversion fees to that list! By searching Mozo's travel credit card hub for some plastic specifically designed for overseas use, you could save yourself big bucks. Let this example speak for itself: Say you went overseas with a standard credit card and spent $5,000 on the card, a currency conversion fee of 3% would set you back $150. But if you searched the travel money market for a competitive deal with no foreign exchange fee, you could keep that $150 in your pocket.
What credit card features should I consider?
Whether you're a no frills kind of borrower or a big spender looking to rack up rewards points, you should always compare the credit card market to ensure you sign up with the best deal for you. Here are some features to look out for:
Interest free days: As the name suggests, your interest free days is the amount of time you will pay no interest, which is usually 44 or 55 days and starts at the beginning of your statement period and ends on your credit card due date. Big catch coming up: If you fail to pay your balance in full by the due date, you will no longer receive those interest free days for your next statement period. The best way to ensure you never miss a payment is by setting up a direct deposit from your bank account to your credit card provider, so you continue to enjoy interest free spending during the next period.
Complimentary insurance: As mentioned above, many reward and platinum credit cards come with some great complementary features including:
- Overseas travel insurance: With inbuilt travel insurance you can save yourself the headache of searching for a good deal and of course the cost. But keep in mind that to activate the insurance, card providers often require you to pay part of your travel expenses on the card and have a return ticket (You can find the provider’s specific conditions in their product disclosure statement).
- Purchase protection: If you’re a big spender who makes big purchases on a regular basis, purchase protection is probably a credit card feature that you should look for. The insurance works by protecting you for a set timeframe after you have made a purchase (around 90 days) against theft, accidental damage or may even cover you if you have lost the item.
- Extended warranties: When you purchase a big ticket item, it will usually come with a warranty but did you know some rewards and platinum credit cards offer complimentary extended warranty insurance? This means that your precious goods will be covered for an extended period. Just keep in mind, to be eligible for the extended warranty, you will need to make the purchase on your credit card.
- Price protection: Retailers are constantly slashing prices, so while you may purchase an item for $1,000 you could come back just a few weeks later to find it is now just $700. That’s where price protection insurance could save you big bucks by refunding you the difference as long as you’ve used your card for the original purchase.
Scheme: When you start looking for a credit card you will find there are three main schemes to choose from - MasterCard, Visa or American Express. But will choosing one from the other make a difference to your experience? Here's a quick comparison:
- Zero liability policy: All schemes come with protection from unauthorised transactions, so if someone has fraudulently charged purchases to your card you should be able to get your money back as long as you haven’t been careless with your card or PIN.
- “Tap and go”: You can make contactless payments for purchases under $100 with VISA Paywave, MasterCard PayPass or AMEX Contactless.
- Worldwide access: Both MasterCard and Visa have large worldwide access at over 30 million locations. While we couldn’t find a statement by AMEX, which states how many worldwide locations they are accessible at, AMEX is generally known to have less locations than MasterCard and Visa.
- Rewards points and freebies: While the scheme doesn’t determine the rewards and features you receive - as the individual bank or provider will decide on the offerings - AMEX cards generally have more generous rewards programs than MasterCard and Visa. But we suggest if rewards points are high on your priority list the best way to decide between the three is to punch in your details into our rewards revealer.
- Surcharge fees: Whether you’re picking up the groceries from the local shops or filling up at the bowser, you probably have been charged a surcharge fee for paying with a credit card at some point. This is because the merchant has to pay a fee to their bank to access the card scheme, which the merchant then decides to pass onto you. While merchant service fees for MasterCard and Visa are generally quite similar, AMEX is known to charge higher fees to merchants, thus the merchant may pass on a higher surcharge to the customer.
What are the credit card fees to watch out for?
Credit cards are great, as they allow you to spend instore, online and overseas but they come at a price. So watch out for these fees that could end up costing you big bucks:
Annual fee: Each year you may be charged a fee for using the credit card, which could be anywhere from $0 to $700. If you're paying a high annual fee, you should make sure it is worth your while with generous rewards points and freebies. But if you're a no frills type of person who pays your credit card bill on time each month, there's no reason you should be forking out money for an annual fee, instead you should look for a low fee credit card.
Cash advance rate: Withdrawing cash on your credit card is a major money drain, as you will not only be charged the cash withdrawal fee (usually a percentage amount around 3% of what you withdraw) but will also incur a high cash advance rate that can soar over 20%. And unlike purchases, interest free periods don't apply for cash advances.
Overseas currency conversion fees: If you regularly jetset overseas, a standard credit card could see your overseas travel money bills soar, as every time you spend on the card you could be hit up with a pricey currency conversion or foreign exchange fee, which can be anywhere between 0%-4%. So when you're planning your next vacay, search Mozo's travel credit card section for some plastic that has low or no foreign currency conversion fees whatsoever.
Late payment fee: When you don't pay your balance by the due date you could be hit up with a late payment fee of around $10-$30 on top of the interest charged. So as suggested above, set up automatic repayments so you never miss the due date.
Is a personal loan or credit card better?
Ah, the age old debate of plastic versus personal loans. The obvious benefit of a credit card is it provides you with the flexibility to pay as you please but standard credit card interest rates can often be hefty over 18%. So credit cards are really ideal for borrowers who only need to borrow small amounts and know they can repay the balance in full each month.
But sometimes with bigger purchases it may be impossible to repay the amount within a 55 interest free period. In that case a personal loan could be a good option, as it allows you to borrow a lump sum and pay it back over a set time frame (1 to 7 years) at a lower interest rate of around 10%.
For more information about the difference between the two, read our full comparison here.
Comparing Credit card deals
Ready to start comparing credit cards? Our comparison table at the top of the page is a great way of seeing some of the best deals in the market right now or alternatively you can use our credit card comparison tool to punch in your details for a personalised search result. And of course we haven't forgotten those looking to switch from their current card, as our Switch & Save Calculator will show you how much you could save by finding a better deal.
What will I need to apply?
There are two main things you will usually need to apply for a credit card:
1. Identification: The lender will ask for details of your identification like your Australian driver's licence number. You will also need to be an Australian resident and usually over the age of 18.
2. Financial details: They'll also want to know details of your employment and how much you earn. Each provider will have their own income requirements, for example if you're applying for a basic credit card you may only need to earn a minimum of $15,000 each year, compared to a premium card that will have a higher income requirement of generally over $65,000 per annum.
