At CANSTAR we research and rate a huge range of financial products – including more than 50 credit card products on the New Zealand market. Credit cards are a hot topic at the moment, thanks largely to the recent rewards program changes. But in the midst of comparing rewards, we shouldn’t lose sight of the fact that Kiwis owe around $6.44 billion on their plastic. And with credit card interest rates averaging more than 17%, it’s not cheap debt!
Here are a few of the common questions we are asked by consumers wanting to compare credit cards.
Q: What credit card interest rates can people expect at the moment?
Unfortunately, and despite a low official cash rate (that recently dropped to 3.25%) credit card interest rates are still relatively high. Currently on Canstar’s database, credit card interest rates vary from just under 13% to more than 25%. While none of those interest rates are fantastic, it’s certainly worth pulling out your credit card statement and checking what interest rate you are paying. Particularly if you carry an ongoing debt! For individuals, every dollar counts. Reducing the interest that you pay on your credit card debt is a really easy way to put more dollars in your own pocket.
Of course, if you don’t owe a debt and pay your card balance in full each month, the interest rate won’t matter to you. You could potentially look for a good credit cards rewards program instead.
Q: How do you choose a credit card to suit your needs?
Choosing a card to suit your needs really comes down to two things:
- How much do you spend on your card each month?
- Do you pay off your card in full each month?
If you continually owe a debt, a low interest rate is the focus here. Look for a low-rate card with a low annual fee. Don’t be swayed by cards offering big rewards, as these usually come with big monthly interest rates and/or large annual fees.
If you don’t spend a great deal on your card – but you always pay it off, the interest rate doesn’t matter because you won’t be paying it. Interest-free days do matter though, to maximise your interest free days. Depending on how much you spend on the card during the year, some sort of rewards offer may be worth looking into – but check the annual fee of any rewards program that you’re considering, to ensure that the rewards you get will outweigh the cost.
If you spend a lot on your card and pay it off each month, you can afford to look for a great rewards program.