Finding Your Perfect Credit Card
Many Australians have made credit cards a key component in the management of their finances. There are well over 14 million accounts (both credit cards and charge cards) issued to Australians, according to the Reserve Bank.
The Australian card market has become so large, and the various rewards schemes on offer are said to probably be the most diverse in the world. In an October 30, 2008 interview, the Prime Minister said that his latest information indicated there were about 500 different products with a bewildering array of features. The PM said interest rates appeared to vary from somewhere around 8 per cent to as high as 28 per cent.
This only underlines one thing: credit card comparison is an extremely important thing to do. Failure to make card comparisons and look for the best credit card for their particular circumstances could cost consumers a small fortune.
The terms and conditions will differ from one card to another; the best card for one person is not necessarily so for another. It is important to evaluate many factors when shopping around for the best credit card deal. Among the key points are interest rate, fees and charges, benefits to members and rewards programs.
Types of credit card: The most common types of cards low-interest cards, rewards program cards, balance transfer/zero-interest cards, no annual fee cards, and premium cards.
* Low rate credit cards trade off extra features such as rewards in exchange for interest rates far lower than the average rate on the market. This makes these cards most suited to those who do not pay their card bill off in full each month. The low rates will only apply for payments made on time and failure to meet repayments may result in late fees and even the removal of introductory rates.
* With rewards cards you can earn benfits such as gift cards or cash-back on your purchases. This is most useful to people who pay in full the amount due for each month. Failing to do this takes away the value of the rewards. Understand that rewards points come only when there are purchases made: one must spend a lot of money first.
* Balance transfer cards give the opportunity to transfer balances from higher-interest cards to lower interest, or even zero interest. Typically there is a specified period such as six or twelve months to pay of the transferred balance at the promotional rate, after this time higher rates will apply to the remainder.
* No-annual-fee cards do not charge any annual fee.
* Premium cards (the ones with metallic names - gold, platinum, titanium) offer a comprehensive set of benefits like free travel insurance, generous rewards schemes, and much more. Their annual fees are substantially higher than regular cards. Regular travellers may find premium cards especially useful.
Interest rates: The finance charge is the major sticking point in cards. The range of interest rate percentages vary dramatically from below ten percent to the high twenties. All cards in Australia give a 55-day interest-free period.
A high interest rate will not be an issue if you pay your card bill in full before the due date each month as the interest free period on purchases will result in no interest being payable. For them, the best credit cards will be those with the most generous rewards schemes.
Low interest is the most important feature to card users who carry a balance over each month as this will make a huge difference on how much you pay in interest charges. For them, it is important to take note of cards that have a low promotional introductory interest rate - which may last for several months - and then leap to a higher rate after the promotional period expires.
Interest rate on cash advances will be set at a higher level than the normal interest rate (which applies to purchases). Interest rate for late payments, penalties and other items will also be different.
The best credit card deal will depend a lot on the person's circumstances and card usage habits. The credit card comparison exercise will try to match those circumstances with the unique terms and conditions in each card. Only when a good match is found should an application be filled out.
About the Author:
Author Richard Greenwood writes on a wide range of personal finance topics. He is Director of the Click 4 Group which runs financial comparison sites to compare credit cards and high interest savings products
