How much do you put on your credit card each month? Do you put most purchases on your plastic, or do you keep it tucked away for big-ticket buys? These are all important questions to think about when considering what credit card will work for you. Canstar breaks down how to choose a credit card that aligns with your spending habits.
Picking the right credit card is crucial to your financial stability. So where to start? In short, when signing up to a new piece of plastic it’s worth considering the following:
- Card type
- Interest rate
- Annual fee
- Rewards value
- Whether you have a credit-card debt problem
- Can your card provider offer you a deal through your home loan
What kinds of cards are there?
The four main types of credit cards are:
- Low Rate: for those seeking a credit card with a low interest rate and flexible repayment conditions
- Low Fee: for those seeking a card with low ongoing fees and who may be looking to access some premium card facilities
- Rewards: for those seeking a card that gives them the optimal return on their everyday spending
- Flight Rewards: for those seeking a credit card that allows them to redeem points for flights
How do you spend on your card, and which of the following user profiles applies to you?
The Infrequent Spender
You know you’re not a big spender. You usually only use a credit card to make big purchases and you consistently pay your balance down each month. Consider a credit card that is low fee, or with no annual fees. Your ability to pay down your balance in full each month means you’re less likely to need a low-interest-rate card, and should focus on avoiding those irritating fees instead.
The Minimum Amount Each Month Repayer
You use your credit card frequently, pay your minimum repayment on time to avoid fees every month, but you don’t always pay the balance in full. A low-interest-rate credit card might work for you.
Since you don’t always pay down your balance in full each month, opting for a low-interest card will mean you’ll accrue less interest on your spends. This should make it more manageable for you.
The Late to Payments Credit Card Holder
You often find yourself forgetting to pay your credit card bill each month. You aren’t as punctual as you might like to be. If you struggle to pay off your credit card and carry over debt from month to month, then the interest rate you pay on your debt can be a real budget killer. A credit card with a low interest rate could be your match.
Don’t be swayed by credit cards that come with rewards. In many cases, they come with higher rates and fees. And, if you aren’t the punctual type, this isn’t the best option to go for.
The Big Spender with Debt Adding Up
You’ve already accrued a fair amount of debt. You’re paying a lot in interest and you often catch yourself overspending, but you want to get on top of your debt. Consider a balance transfer credit card offer. It’s one way to ease clearing your debt, without having to worry about paying interest.
A balance transfer involves transferring your credit card debt to a new credit card with a lower interest rate, often a promotional rate, and paying off the debt before the end of the low-rate period.
The lowest rates are 0% – but it’s worth noting that some 0% credit-card balance transfer offers can come with an annual fee that reduces the benefits of the 0% rate. Before jumping in and signing up for one of these balance transfer deals, consider the pros and cons of balance transfers and decide whether it’s a good idea based on your spending habits.
The Rewards Fan
You love a perk or offer with a credit card. You use your card for almost every purchase, pay down your balance consistently each month, and you know you’re good at accumulating points. A good option is a rewards credit card.
As you’re a frequent user of your card, you’ll get the most value out of a card with a rewards program. These cards generally have high interest rates and fees attached to them. But if you use them wisely, your credit card provider can end up paying you to use their card, in the form of cashbacks and rewards.
Keep in mind
Credit cards are not for everyone. If you’re not disciplined – and find easy credit too tempting – then you might be better off sticking to spending your own money and using a debit card instead.
Credit cards can get you into deep financial trouble, particularly if you’re an impulse buyer. And, if you already owe money on your credit card, then paying it off should be your top priority.
How can I compare credit cards?
As always, the choices are all up to you when it comes to credit cards. You can use the Canstar website to evaluate your credit card and decide whether or not you’re getting outstanding value. Compare interest rates, features, and fees for credit cards suited to your spending profile, just click the button below:
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