How To Choose The Best Credit Card For You | A Useful Guide

Thinking of getting your first credit card or switching to a new one? It’s important to seek advice on how to choose the best credit card for you. This is because it’s likely you’ll stick with the one you choose for years or even decades.

While you can change cards when you please, the hassle discourages many Australians from doing so. With all the bells and whistles that credit cards come with these days, it can be hard to know which features are better than others, which matter, and which don’t.

To find the best credit card for you, here are the key factors to consider.

Interest Rates

Are Low Interest Credit Cards The Better Option?

Credit cards with low interest rates may sound like the safe option. However, these credit cards often charge higher annual fees to make up for charging less interest. Be careful not to assume that a low interest credit card is necessarily the best choice for you.

If you’re the type to always pay your monthly balance on time, then you won’t be receiving the benefit of low interest anyway. Instead, you will only be paying more than you need to on other fees. This means low interest rates may not be worth your while.

If, on the other hand, you plan to use your credit card as a borrowing tool, then low interest cards are the way to go. Paying a higher annual fee is likely to work out cheaper than consistently paying higher interest.

Bonus tip: If you are repaying credit card debt, it’s a good idea to pay more than the minimum payment each month. When you only pay the minimum, this draws out your debt for longer and the amount of interest you ultimately pay accumulates. You will save a significant amount on interest payments by paying debt off as quickly as possible.

Reward Schemes

Rewards programs are incredibly enticing. The way they are advertised makes it seem like you really are receiving free money. However, as the saying goes, there’s no such thing as a free lunch. That means that the better the reward scheme, the more you typically pay in annual fees and interest.

Is A Handsome Rewards Scheme Right For You?

It’s important to consider your spending habits and lifestyle to decide whether an attractive rewards scheme is a good idea. To make a return on your rewards, you typically need to spend about $2000 a month. If you spend significantly less than that with your card, the cost of fees may outweigh the benefits of your rewards.

However, if you can find a rewards scheme that is well suited to your spending habits then this could definitely be what makes a certain credit card perfect for you.

Bonus tip: Look out for rewards schemes with points that expire after a certain amount of time. Assess whether the period before expiration is long enough for you to safely realise the benefits of your spending. Otherwise, it might be best to limit your search to rewards programs that don’t let points expire.

Annual Fees

Determining whether the annual fee is justified can involve tedious mathematics. It’s not easy to figure out for yourself whether the $100 sign-up bonus and various perks balances out a $400 annual fee and 12% interest rate.

Should You Avoid Hefty Annual Fees?

Credit cards with annual fees shouldn’t be instantly disregarded. There are certain consumers who would benefit enough from the card’s rewards schemes and perks to more than justify the annual fee. 

Typically, if you are expecting to pay your balances on time and not spend a significant amount each year, then cards with no annual fee are likely to suit you best. The opposite is true for big spenders and those who need low interest rates for months when they might not pay their balance on time. These consumers are likely to find they enjoy the benefits that come with the card enough to make the annual fee worthwhile.

The shiny deals and less advertised caveats vary with every credit card. This can be enough to make comparing a range of cards a headache. Instead, to be confident that you truly have the best credit card that suits your lifestyle, spending habits and needs, the experts at Compare & Connect can do all the comparing for you.

Enlisting our help will cost you nothing but save you an abundance of time and money. Get in touch today to find a credit card that is a match made in heaven.