If you are after a new credit card or looking to switch cards you might be wondering why you'd opt for a card that charges fees over one that doesn't?
If only the credit card world was that simple. Luckily for you, you've got us to help explain things more clearly than some of the banks and card providers that have credit card deals in Australia. Our quick guide below will give you the info you need to decide whether a low fee or a no fee card is going to be a good choice for your wallet.
What's the difference between a low fee and a no annual fee credit card?
A no fee credit card is a credit card that doesn't have an annual fee. Annual fees on credit cards can range from $0 to over $300+ a year if you get a high end rewards card.
Some credit card providers have special offers that will waive the annual fee for the first year or you might get a 'life of the card' deal which means that as long as you keep the credit card active you will never pay an annual fee.
A low fee credit card is a card with an annual fee between $30 - $60 and for this fee you might get some basic rewards or complimentary perks like extended warranty insurance.
Like most credit cards, no annual fee and low fee cards will still have some fees which you'll want to watch out for. The most common are:
Late payment fee. These can be easily avoided by setting up automatic monthly repayments or a direct debit from your bank account each month.
Foreign exchange fee. If you buy something online from an overseas website or travel internationally, every time you make a purchase a percentage of the purchase amount will be charged as a foreign exchange fee or margin in Australian dollars.
Cash advance fee. Using your credit card for cash withdrawals is one of the biggest no no’s a cardholder can make as you’ll start paying interest immediately. Generally the fee for cash advances is charged as a percentage of the advance amount or a minimum flat fee depending on which is higher.
How do I find the right low or no annual fee card for me?
Just because a card doesn't cost anything to keep in your wallet it doesn't mean that all no fee cards are created equal. This means that when you are choosing a low to no fee credit card you really need to take into account your spending habits and how disciplined you'll be in paying off debt accrued on the card.
The interest rates of low and no annual fee cards are generally higher than say a low interest rate card, which charges you an annual fee but in return you get a lower interest rate, so they are best suited to people who are able to pay off their credit card balance in full each month. If you carry a balance on your credit card, the interest you end up paying could outweigh the money you save by not paying an annual fee.
Other things to compare include:
Balance transfer rate. Some no fee cards will have the option to transfer a balance from an existing card to your new card. Not paying a fee or interest for a set period could help you to get debt under control.
Rewards. Unlike low interest rate credit cards that are rarely connected to rewards programs, there are a few low fee and no fee credit cards that allow you to earn rewards points that you can redeem on everything from gift cards to travel. Just check if there are any fees for signing up to the rewards program as many airline programs do have joining fees and could negate the value of any rewards you receive.
Interest free days. You may get ‘up to 55 interest free days’ but only if you pay your balance off in full each month.
Complimentary Insurance. You can get a wide range of complimentary insurances on low fee credit cards ranging from extended warranty, purchase protection to overseas travel insurance.
Credit card calculators, what numbers should I be crunching?
Now that you know the ins and outs of no fee credit cards it's time for you to do some number crunching.
Find a new credit card. If you are looking for a new card you have two options. You can use the table at the top of this page to review some of the current deals in the market for no or low fee cards and compare them on interest rate and fees. Once you have compared your options you can click on the ‘go to site’ button where you will be taken to the credit card provider’s site where you can fill out a secure application.
A second option is to search through our database using our credit card search tool. This will give you a full listing of the hundreds of credit cards available, and you can shortlist or filter on features that are most relevant to you.
Switch to a new credit card. If you already have a credit card and you’re looking to switch to a better one with lower fees and interest then you’ll want to use our Switch & Save calculator. This will take into account your current balance, repayment amounts and produce a personalised report to show you which cards will save you the most.
Ditch debt. If ditching debt is your major aim we have created a debt payments calculator that uses your unique information to give you a personalised result that indicates the length of time it will take to kick that debt to the curb for good with your current credit card. You can also use our Switch & Save calculator and choose the transfer an existing balance option to see which cards will get you debt free the fastest.
How do I apply for a no annual fee credit card?
The internet is a wonderful thing. Not only can you compare credit cards on Mozo in your Pjs but in most instances you can also apply for a new credit card in them as well. Credit card providers have online application forms and you can get approval in minutes.
You'll need to be a bit organised prior to completing the application so get things like your current bank statements handy, a payslip and other ID like a drivers licence or passport. It is also a good idea prior to applying for new credit to get a copy of your credit report to ensure that there isn't any errors in the information that could impact your chances of getting approved. You can get a free copy of your report annually, see here for more information.
To apply for certain credit cards you may also need to meet set residency, age or income criteria.
Written by: Kelly Emmerton, Mozo Money Editor