There are several different types of credit cards. Canstar assesses credit cards under 5 different profiles. Which type of card suits you?
View “Low Rate” credit cards
For consumers seeking a credit card with a low interest rate and flexible repayment conditions. In general, “Low Rate” cards might suit people who…
- use their credit card for everyday spending or regularly making large purchases.
- often fail to pay off the full closing balance at the end of the month.
- sometimes only pay the minimum monthly repayments.
Tip: A low interest rate is the focus here but you might also want to look for a card that has a low annual fee. Currently on Canstar’s database the lowest credit card ongoing interest rate is 7.99%.
Trap: Cash withdrawals can be expensive – even on low rate credit cards. Use a credit card at an ATM and you will usually be stung with a 2-3% fee as well as interest charges that begin to accrue straight away at very high rates – usually around 20% p.a.
View “Low Fee” credit cards
For consumers seeking a credit card with low ongoing fees and who may be looking to access some premium card facilities. In general, “Low Fee” cards might suit people who…
- usually pay the balance in full each month, only occasionally taking more than one month to pay off a large purchase.
- don’t use the card that often, only for the odd large purchase or for shopping online.
- aren’t particularly interested in rewards schemes or frequent flyer points.
Tip: You might benefit from free extended warranty insurance that comes on some low cost premium cards.
Trap: If you always pay off your credit card balance in full you might be missing on rewards by going for a “no-frills” card. Crunch the numbers to see if paying an annual fee for a rewards credit card could see you better off.
View “Rewards” credit cards
For consumers seeking a credit or charge card that gives them the optimal return on their everyday spending. In general, “Rewards” cards might suit people who…
- pay their closing balance in full each month (interest rates on rewards credit cards are often around 20% p.a.).
- want to earn points that can be redeemed for cashback, gift vouchers, merchandise, or travel agents.
- aren’t interested in holding or redeeming points with frequent flyer programs (e.g. Qantas Frequent Flyer or Virgin Australia’s Velocity program).
Tip: If you don’t think you aren’t getting much back for your spending, see what you can get by switching to another bank. There is always a lot of competition for new customers – whether it is bonus points, cash back, or reduced annual fee offers.
Trap: Remember to review your card regularly as rewards programs change frequently. A real stumbling block for big spenders can be rewards points capping or points expiry.
View “Frequent Flyer” credit cards
For consumers seeking a credit card or charge card that will allow them to redeem points for flights. In general, “Frequent Flyer” cards might suit people who…
- pay their closing balance in full each month (interest rates on frequent flyer credit cards are often around 19% p.a.).
- want to earn points to redeem for international or domestic flights.
- are members of a frequent flyer scheme and want to boost their points balance (e.g. Qantas Frequent Flyer or Virgin Australia’s Velocity program).
Tip: You can usually get better “bang-for-buck” for your points by redeeming for upgrades rather than rewards flights. Both Qantas and Virgin allow you to purchases economy seats and then upgrade to business class using points (where available).
Trap: If you like redeeming points for gift cards, frequent flyer credit cards are probably not for you. Frequent Flyer points are always best redeemed for flights or upgrades – rates for gift cards and merchandise are comparatively poor.
View “Premium” credit cards
For consumers seeking a credit card or charge card that comes with extensive benefits beyond the standard offerings. In general, “Premium” cards might suit people who…
- want all of the bells and whistles that come with Platinum-style cards such as:
- Travel Insurance for when you go overseas
- Inconvenience cover if your domestic flight is cancelled
- Price protection cover if you buy something from a retailer and soon after it drops in price.
- Extended warranty cover for when something breaks down just after the warranty expires (as if on cue).
- are interested in earning rewards points, but aren’t trying to get the absolute maximum amount of rewards for spending – they see the points as more of a bonus.
- pay their closing credit card balance in full each month (interest rates on Gold, Platinum, and Black cards are often around 20% p.a.).
Tip: Set up an automatic direct debit so that your card balance is paid each month in full. Interest rates on Platinum-style cards are higher than average and making a late payment on a large balance can sting.
Trap: Travel Insurance on credit cards can be as good as policies that you purchase, but there will always be something that you are required to do to activate the cover. This could be as simple as spending $250-$500 in prepaid travel expenses on the card but some card issuers may require you to pay for the return flights in full. Make sure you are covered before you leave!