Credit Cards in 2020: A report into choosing the right card for your needs

Our report at a glance:

• Picking the right credit card is crucial to your financial success.
• In 2020, 14% of people are getting a new credit card, 12% are upping their credit limit^ 
• 11% of people are cancelling their credit card, while many aren’t using one right now.^
• Your spending and budget needs should guide your card research.
• 5 rules responsible credit card holders follow.

Introduction: Deserving of some credit?

While credit cards can help with immediate expenses, they require careful consideration in the bigger picture. This is especially so in uncertain times, like those presented to us in 2020. Recent Mozo research shows that consumers are not unanimous about credit cards right now either. For example, 14% of people we surveyed mid-year said they were getting a new credit card, 12% said they were upping their existing credit limit, while 11% said they were cancelling all lines of credit. A further 19% said they are using buy now pay later services to get by instead.

So, it’s a mixed bag when it comes to using credit cards across the country. Given the varied needs of Aussies, our Mozo experts scoured the credit card marketplace and picked the best across four categories as part of our latest Mozo Experts Choice Credit Card Awards: No annual fee cards, Balance transfer cards, Low rate cards and Rewards cards. In line with this research, we have also broken down the different types of credit card holders that make up the population and found the cards most suited to each.

Credit card matchmaker: What sort of spender are you?

Have you ever wondered which type of card is actually best for you and your spending habits? What’s your perfect match? 

We have. 

Here’s a rundown of some credit card habits you might have and which category of credit card is most likely to suit them.  

Credit card match 1: The occasional spender

• Your credit card match: No annual fee credit card. 

• The benefits: You could save up to $1,200 a year on annual fees, according to the Mozo database.* Your ability to pay down your balance in full each month means you are less likely to need a low interest rate card and should focus on avoiding pesky fees instead.

• Mozo Experts Choice Awards categories for you: Best No Annual Fee Credit Cards, Best No Annual Fee Platinum Credit Cards.  

*$1,200 is the highest annual fee currently offered on the Mozo database. These types of fees can range anywhere from $0 to $1,200. 

Credit card match 2: The overspender with debt

• Your credit card match: Balance transfer credit card. 

• The benefits: Opting for a balance transfer offer is a savvy way to clear your debt without having to worry about paying interest. Currently in the Mozo database, providers are offering 0% on balance transfers from 5 months up to 30 months. So, you’ll have to be realistic about how long it’ll take to pay down your balance and choose the right term for you. 

• Mozo Experts Choice Awards categories for you: Best Balance Transfer Credit Cards, Best Balance Transfer Platinum Credit Cards.

Credit card match 3: The minimum amount repayer

• Your credit card match: Low interest credit card.  

• The benefits: You’ll want to avoid hefty interest rates since you don’t always pay down your balance in full each month. Opting for a low interest card will mean you accrue less interest on your purchases, making it more manageable for your budget. 

• Mozo Experts Choice Awards categories for you: Best Low Rate Credit Card, Best Low Rate Premium Credit Card. 

Credit card match 4: The rewards points collector

• Your credit card match: Rewards credit card.  

• The benefits: You’re all about perks, so why not use a credit card that gives you just that? Because you use your credit card for everything, you’d get the most value out of a rewards program. While these cards generally have high interest rates and fees attached to them, things like bonus points offers and freebies make up for it. 

• Mozo Experts Choice Awards categories for you: Best Rewards Credit Cards, Best Premium Rewards Credit Cards, Best Qantas Frequent Flyer Credit Cards, Best Qantas Frequent Flyer Premium Credit Cards.

5 rules responsible credit cardholders follow

As you can see, finding the right credit card is quite personal and ultimately comes down to the specific needs and circumstances of the individual.

That said, most of us would welcome some help on how to use our credit cards more responsibly. Here are a few tips to show you how:

Rule #1. Pay your balance off in full & on time:

The number one rule is to always pay off your balance in full and on time - or run the risk of spiralling into debt. This possibility is why some people associate credit cards with the potential for money troubles. But if you consistently pay your credit card balance off in full (not just the minimum repayment amount) each cycle before your interest-free period ends, then you won’t cop any interest charges. 

Top tip: Set up a regular automatic direct debit to ensure your credit card bill is paid off in full and on time each month to avoid being charged interest.

Rule #2. Don’t bite off more than you can chew:

While having a credit card technically means you can use the bank’s money to buy something you can’t afford, it doesn’t mean that you should. Any purchase you make on your credit card must be paid off eventually, so only use your card for what you can afford to pay back. 

Keep it simple: aim to have the money ready to transfer into your credit card account as soon as you make a purchase. Even if you fall short on one occasion, you’ll want to be certain you can pay off this debt at a later time.

Top tip: If you’re making a bigger purchase on your credit card that’ll take a month or two to pay off, remember to budget for the expected interest charges for that period. Note that by doing this you’ll lose your interest-free days for the cycle. So you’ll also need to budget for other charges that pop up if you continue to use your credit card with no interest-free period.

Rule #3. Approach ATMs with caution

Credit cards and ATMs don’t always mix. If you withdraw cash from an ATM with your credit card you’ll cop a cash advance rate, which according to the Mozo database is generally 20% or more. Not to mention, interest-free days don't apply for cash advances, so you'll be charged interest straight away.

Top tip: If you really need to use cash, then withdraw it from your debit card instead and keep your credit card for cardless transactions instead.

Rule #4. Don’t wait until it’s too late to ask for help

If you’re suddenly struggling to keep up with your credit card repayments, don’t wait until you’re knee deep in interest charges to ask your bank for help.

Top tip: Prevention is always better than a cure. You’re better off nipping it in the bud and seeking help from your bank’s hardship department while things are a little easier to manage.

Rule #5. Always keep an eye out for a better deal

Never get too comfy with your credit card and always keep an eye out for a better deal. You might think you have the best credit card deal around right now but things can change.

For example, a low rate credit card might’ve been the right choice for you at one stage, but if you’re now using your card a lot more, a rewards card might be more beneficial. So, regularly review your credit card to ensure you’ve still got a competitive offer that works for you and the way you spend. 

Top tip: Find out for yourself. Use our credit card comparison tool to see what’s around and then consider making the switch if you find a better deal.

^Data collected in a survey conducted by Mozo in June.