Does your credit card match your spending habits?

How’s this for a New Year’s Resolution? Making the most of the credit card rewards we earned buying Christmas presents – or maybe just paying off our Christmas credit card debt, full-stop.

We’ve all done our bit for the retail and tourism industry over the holiday season – up to hundreds of millions of credit card dollars charged, according to the Reserve Bank of New Zealand. So now is the best time to pay the balance on your credit card before those interest-free days expire and you get hit with interest changes.

The best step towards getting your credit card back on track is making sure the interest rate and annual fee you’re paying matches your spending profile. That’s why at CANSTAR, we regularly research the credit cards on offer in New Zealand, and give them star ratings based on how they cater for borrowers across the Low Rate, Occasional Spender, Everyday Spender, and Big Spender profiles.

What do those credit card profiles mean?

Wondering what type of credit card you should get? This depends on what type of spender you are. Ultimately, it comes down to two questions:

  • How much do you spend on your card each month?
  • Do you pay off your card in full each month?

Here’s how CANSTAR defies the four types of credit card user…

1. Low Rate

Someone who uses their credit card frequently every month, but struggles to pay it off in full. They typically spend $14,000 a year while constantly revolving a debt of $9,000 on their credit card.

If this sounds familiar, you should consider looking for cards with a low interest rate and a low annual fee. Currently on our database the lowest interest rate is 12.69%, and there are 5 cards offering a rate of less than 15%. Rewards cards may not suit you as they usually have high monthly interest rates and large annual fees attached.

2. Occasional Spender

Someone who keeps a credit card in reserve for big ticket items, going on holidays, or in case of emergencies, and then pays off the balance over a few months. Occasional Spenders typically spend $6,000 per year on their card and they can revolve up to $1,500 twice a year, so they should look for a maximum credit limit of $1,500 or more.

You might want to check out the selection of cards with a low interest rate and low or no annual fees. Finding a credit card that works for you, not against you, is easy if you carefully examine what you spend and how you spend it. Interest-free days aren’t going to benefit you all that much if you are carrying a balance over several bills.

3. Everyday Spender

Someone who uses their card frequently every month, but is able to pay off the card in full each month. In 2015, 58% of banking customers surveyed by Canstar Blue NZ said they pay their balance in full every month, which is great to hear.

The Everyday Spender typically puts about $2,000 per month or $24,000 a year on the card. An Everyday Spender should look for a maximum credit limit or $3,000 or more, as they can revolve up to $3,000 once a year.

It doesn’t matter as much what interest rate you get, since you don’t plan to pay interest! You might want to look for the maximum number of interest-free days, since the everyday spender tends to hold back on repaying until the eleventh hour. Currently we list 27 credit cards for the Everyday Spender that have 55 interest-free days.

Depending on your overall “spend” per year, it may also be worth looking into a few rewards offerings and other features – as long as the benefits outweigh the cost.

4. Big Spender

Someone who spends a lot on their card and always pays in full before interest is charged. Big Spenders routinely put around $5,000 or more per month, or $60,000 or more per year, through their card. Cards for a Big Spender should have a maximum credit limit of $9,000 or more, as this borrower can revolve up to $9,000 once a year.

The interest rate is no problem if you’re paying it off before interest is charged, so you can look for a card with either no annual fee or a great rewards program. You usually won’t get both, but if you use your card a lot, you may as well make it work for you. Currently we list 38 credit cards for high use.

Cards aimed at Big Spenders often have a high annual fee and high interest rates, so a few missed payments can write off any rewards you received. Make sure you pay it off like clockwork!

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