Co-Author: William Jolly
If you are not disciplined and find your credit card too tempting, then you might be better off cutting it up. Credit cards can get you into financial trouble, particularly if you are an impulse buyer. And of course, if you already owe money on your credit card, then paying it off should be your top priority.
According to MoneySmart’s debt clock, Australians have currently racked up nearly $32 billion in debt, with an average of $4,200 per cardholder and interest payments of more than $700 per year. That’s a lot of debt!
But it’s not all doom and gloom – credit cards are not the source of all financial evil.
If you do have the self-discipline to manage your spending, there can be some great advantages to using a credit card. Here are 13 ways credit cards can make your life easier.
1. Rewards programs
There are many credit cards that have great reward programs, but they need to work for you. There is no point overspending or buying things you don’t need just to get points. So, think about how you use your credit card and then choose which program would benefit you most. You can spend credit card rewards points on all sorts of things, from flights and car hires to petrol and grocery shopping.
Also, check if there is an annual fee for the card. Sometimes these can be paid for with points but you need to make sure you would earn enough points in the year to pay off the fee and get something with the leftover points.
You can compare Rewards credit cards on the Canstar website:
You can also have a look at the Rewards credit cards that were awarded a 5-Star Rating in our 2017 Credit Card Research.
Showing rewards credit cards in Canstar’s database with links to lenders’ websites. The display is sorted by points per $1 (highest first) for a spend of $3,000 per month.
2. Frequent Flyer miles
If your lifestyle is one that involves a lot of travel and time spent in airport lounges, then a Frequent Flyer credit card might be the right option for you.
These cards are very similar to rewards cards in that you earn points by making purchases, but they are made with the purpose of spending said points on flights, lounges and concierge services. You can also spend points to upgrade your existing economy seat to business and first class.
However, if you like spending points on things like gift cards and everyday stuff, then a Frequent Flyer card probably isn’t right for you, as the rates for these purchases tend to be comparatively poor.
You can compare Frequent Flyer cards on the market with Canstar, by using the comparison button below or by following the links in the table.
On the lookout for a frequent flyer credit card that will earn you points for travel? Check out our comparison tables below which provide a snapshot of the credit cards on offer for different airlines, sorted by airline points per $1 and are based on a $3,000 monthly spend.
3. Signup bonuses
Many credit cards offer attractive bonuses that reward you for signing up with them, such as large amounts of bonus points, complimentary flights, low or nonexistent fees and other long-term perks, such as promotional and reduced interest rates.
However, not all cards with a signup bonus are good value, so you need to have a close look at the terms and conditions before applying. Chances are, there will be certain requirements that need to be met, such a minimum expenditure in the first few months. If these requirements are in line with your spending habits, then a credit card with a signup bonus can be excellent value.
You can read the article below to see what high-rated credit cards are currently offering signup deals, or you can look directly in the table below.
Showing products in Canstar’s database with links to lenders’ websites. The display is sorted by Star Rating for credit cards that offer signup bonuses to consumers for a spend of $3,000 per month.
As opposed to Rewards cards, which earn you points for spending money on certain things, cashback cards pay the money back into your account. These cards will save you money based on your monthly expenses, and the amount you’ll get back will depend on the credit card’s cashback rate. The right card will earn anywhere from 1% to 5% back on your purchases. Depending on where you shop, certain places will even give higher rates of up to 10% for certain purchases during bonus periods.
5. Complimentary travel insurance
Most credit cards come with a number of consumer protections, including rental car insurance, purchase protection insurance, extended warranty insurance and even travel insurance. According to Canstar data, more than one in five visitors to our site look for cards with travel insurance attached, making it one of the most in-demand features around.
These complementary extras can save you a great deal of time and money as well as peace of mind, so it might be worth looking for credit cards that offer travel insurance.
You can also read our article listing credit cards that offer complementary travel insurance as of May 2017.
Showing products in Canstar’s database with links to lenders’ websites. The display is sorted by Star Rating for credit cards that offer complimentary travel insurance to consumers for a spend of $3,000 per month.
6. Price protection insurance and purchase protection insurance
As well as travel insurance, popular features that come with credit cards are price protection insurance and purchase protection insurance.
Price protection insurance is a form of insurance that, if you can show proof, will pay the difference to your credit card account if a product you bought has dropped in price. This type of insurance does not cover purchases made outside of Australia, and terms and conditions will apply based on each different lender.
Purchase protection insurance, on the other hand, covers new items that you buy against theft and accidental damage for up to six months from the date of purchase. So say, for example, if you buy a new iPhone and drop it in the sink, you can make a claim for the amount that it cost so you can buy yourself a new one.
As with price protection insurance, terms and conditions apply. You can read more about each type of insurance in the articles below.
7. Fraud protection
With the wealth of scams and phishing attacks that are occurring today, it is reassuring to know that the vast majority of credit cards on the market cover security and fraud protection, keeping your money safe from fraudulent purchases.
For example, Visa credit cards have the ‘Verified by Visa’ technology in them, which instantly monitors your account for suspicious purchases. If your card is used fraudulently, you can simply notify your credit card company. Doing so means you won’t have to pay for that transaction while they sort out a new card for you.
The next two points make this feature even more important.
8. Convenient and safe online shopping
Not only are credit cards convenient to use for daily point-of-purchase shopping, but they’re also much easier to use online. As mentioned above, most credit cards now come with several layers of security and fraud protection, so you’re at little risk of losing your money when making online purchases. Most sites also give the added benefit of saving your credit card details. If you’re using a reputable website that you trust, this can be a great way to save time on future shops.
9. Less cash on hand
Last month, Canstar revealed that 60% of Gen Y claim that only use cash when absolutely necessary. We are fast becoming a cashless society, and credit cards – with the help of digital wallet technology in smartphones – are more popular than ever.
Credit cards are not only a more convenient payment option for a lot of people, but they are also safer; a credit card can be quickly cancelled if it is stolen. Cash can never be retrieved if you lose it, unless you’re lucky enough to find it again.
10. Works in any currency
You can take your credit card with you overseas in order to make purchases in a foreign country; you will be charged a relatively minor currency conversion fee in the meantime. There are even some cards that don’t charge a currency conversion fee in certain stores and countries.
Travel credit cards are a popular way to spend money overseas, and good ones offer strong exchange rates, concierge services and pre-authorisations for hotel bookings, among other benefits. You can learn more about travel credit cards by reading our 2016 research below, and by following the links in the table.
Here’s a snapshot of travel money card products currently on the market for persons travelling Bali. Please note this products have been sorted by our star ratings (highest to lowest) with direct links to the providers website.
11. Near universal acceptance
If you are travelling overseas, then having a credit card can be a safer way to travel and make purchases. Not all debit cards are universally accepted, whereas credit cards have near-universal acceptance around the world. It’s always a good idea to take some cash with you, and a backup card as well, just in case!
12. Build your credit score
Having a credit card can help you to build up your credit history and a credit rating – if you make sure you pay off the balance in full every month and keep your spending at a low level. A good credit score will make it much easier and less stressful to apply for various types of loans in the future, such as car loans and home loans, so practising good repayment habits with a credit card can be a good way to build a positive credit score.
Our article below has some useful tips on how you can use your credit card to improve your credit history:
Ensure that you use it wisely though, so that the value it adds to your credit rating is positive. If you miss a few minimum monthly repayments, this will be a serious black mark on your credit history.
13. Interest-free days
The final benefit you can get from using a credit card is the number of interest-free days on offer. The majority of credit cards offer 55 days interest-free, with some as high as 62. This means that you can have up to 62 days where you are not charged interest on any purchases.
To obtain the full amount of interest-free days, you need to pay off your balance for the current and previous month’s statement. You can learn more about how interest-free days work by reading the article below.
Interest-free days can also be very effective when combined with some of the other benefits in this list. For example, you can earn rewards points or get cash back on purchases made that won’t charge you any interest, giving you an even better return than usual.
If you have good self-discipline and don’t spend more than you earn, then a credit card can be a useful financial tool that you can use to your advantage. To find the right one for you, start by comparing your options on the Canstar website: