- Interest rates apply when you need to start paying the banks back for the purchases you make. If you struggle to meet monthly credit card payments, then go for a card with low interest rates to avoid getting penalized. You can even just compare credit cards with low interest rates on financial comparison websites like Mozo.com.au
- Interest-free days are generally found in most, if not all, credit cards. This is how much time you get before the banks start charging you interest for your purchases. So for example, “44 interest-free days” means you have up to 44 days to pay off your monthly credit card spending before the bank starts charging interest. As most people get paid monthly, this gives people some breathing space to get their monthly finances in order. Make sure you compare credit cards to see what suits your financial situation.
- Annual fees vary from card to card. If you want a credit card with a higher credit limit and lots of rewards, annual fees will naturally be higher here. But if you prefer to avoid fees and simply want a card that helps pay the bills, then go for one with low annual fees. Again, it pays to compare credit cards according to their annual fees on websites like mozo.com.au
- Rewards program are typically great for those on a higher income, or people who are frequent users of credit cards. Interest rates and annual fees will be much higher, but you get perks like frequent flyer points, loyalty points to redeem for things like electronics and even free insurance. If this is a handy option for you, it’s a smart choice to compare credit cards to see what reward program they have.
- Credit limit is definitely something you need think about. Just because you’re on a higher income doesn’t mean you need to get a card with a high credit limit. If you know you can’t handle the responsibility, go for a lower credit limit. It could just mean you stay out of debt!
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Credit cards are fantastic financial tools to help you manage bills and pay for goods, and can even reward you according to how much you spend. But before you launch into the world of credit cards, you need to do your homework and know what you’re getting yourself into. And the one thing you must do above everything else is to compare credit cards from a range of banks so you get the perfect one that matches your lifestyle and needs.
When you compare credit cards, you make sure things like interest rates, annual fees and rewards points are exactly what you want – not what the banks say you need. Having a credit card is great for those times when you need extra credit to make big purchases like holidays, unexpected medical bills, or car insurance and registration. But it does come with a lot of financial responsibility. You need to ensure that you can control spending and not end up in debt, which means when you compare credit cards, you can see how one card fits into your lifestyle more suitably than the other.
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Although some aspects of the media would like to convince the general public that credit cards are nothing but bad news, the truth is life without one can sometimes be difficult. Numerous websites and companies require a credit card for authentication purposes, as well as the fact that anything you buy with a credit card is protected by your credit card company. When used correctly, and in moderation, credit cards can be the most useful payment tool available to you.
The first, and perhaps most important, trick is to find a card that is applicable to you and your spending patterns. If you intend to use a card for one big purchase that you plan to pay off in stages, the best card is one with a low overall interest rate. Often, cards with low rates come with few enticing introductory offers – such as interest-free periods – but this becomes a benefit, as the long-term rate is lower. After all, there is little point having an interest-free period when you plan to be paying something off for a long time – interest is going to accrue, so it’s more important to get a rate that’s lower in the long run. For all these reasons, it is always best to compare credit cards before applying for one.
If, however, you use a card for every day purchases and can pay it off in full each month, the opposite is true. Go for a card that offers as many interest-free days as possible, which may make it possible to pay no interest at all. There are many cards available where the interest-free period is more than 40 days, which means if you do pay off the balance in full at the end of each month, you will accrue no interest at all. To ensure you get the best deal, carefully scrutinise the terms and conditions of any card you are considering applying for.
Secondly, a highly important part of using a credit card is to remember this: wherever possible, avoid the cash advance. Credit card companies make an obscene amount of money from cash advances, with some charging up to 27% interest on any cash withdrawals. If you need money for something when only cash will do, there are ways of obtaining the money you need from your credit card without paying a cash advance fee.
Using an online payment system like PayPal, send money to a trusted friend – or even yourself, using a different account – using your credit card as the source of funding. This will count as a purchase, so your normal interest rate will apply. When the money arrives in your online account, transfer it into your bank account. This process takes around five days, but on large amounts it will save you a fortune, as much as $270 on a $1000 transaction.
Finally, one of the most popular credit card tricks is known as ‘stooging‘. Hundreds of credit card companies offer introductory interest-free rates, designed to entice new customers. However, when the interest-free period has expired, the annual rate is usually quite high.
To get around this, find a card with a large interest-free period on balance transfers. Move your balance over to the card for the interest-free period, and then when that period is nearing an end, apply for another card with an introductory interest-free rate on balance transfers. Again, transfer the balance across from your first card. You can keep doing this for as long as different credit card companies accept you for new cards. Stooging can save you a great deal of money if you have a large balance that you are paying off month-by-month. Just remember to cancel each card before the interest-free period ends and move your balance in plenty of time. Credit card companies don’t like this, but it is perfectly legal.
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Where can I compare credit cards online?
Most consumers know how important it is to compare credit cards before applying for one. The problem is how overwhelming and confusing the comparison process can be. There are numerous credit card companies and each company offers several different types of cards. Fortunately, there are sites like Mozo where consumers can quickly and easily compare credit card offers.
All of the important factors outlined above are presented side-by-side. At a glance, you can see which card offers the lowest APR and who charges the highest annual fee. When you find a card that interests you, simply click on it to learn more. Mozo.com.au is an objective third party, so you can trust that their information is completely unbiased. If you decide to apply for a card, Mozo.com.au links directly to the online applications.
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One of the biggest reasons it’s important to compare credit cards is that there are different types of credit cards. For instance, there are low interest rate cards, which are a good choice for people who anticipate carrying a balance. Then there are balance transfer cards for those looking to consolidate the balances they’re carrying on multiple high-interest credit cards. If you don’t do some research, you won’t know if you have the right card for your personal financial situation.
Once you know what kind of card you want, it’s time to start looking at the numbers. Carefully compare the APR (annual percentage rate) offered by each card. There are a couple of things to look out for with regard to interest rates. First, note whether the rate advertised is an “introductory rate.” Often the rate advertised on a credit card offer will only last a short period of time, such as six months. Second, pay attention to whether different rates apply to different types of charges. There may be, for example, one interest rate that applies to purchases and a second, higher interest rate that applies to cash advances.
A variety of other factors also affect whether you’re getting the best deal. When comparing credit card offers, be sure to consider annual fees, rewards, cash back offers and late fees as well.
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