Which Credit Card Should You Get

Choosing a credit card can feel more than a little overwhelming. There are a zillion choices, each subtly (or not so subtly) different from the next.  The good news is that with a little personal understanding, you can get the right card that will do the most for you, whether you want to minimise fees and interest or snag a free flight every year with all those rewards points. 

Despite all the variety in cards, the differences boil down to a few key items:

• Annual Fees ($0-$300, more on prestige cards, sometimes waived if you spend more than a set limit per year)
• Interest rates (on purchases, balance transfers and cash advances, generally range from 0% to 25%, more on some Store cards)
• Interest Free Periods (0-55 days)
• Late payment fees ($10-$50 per occurrence)
• Over limit fees ($10-$50)
• Rewards programs (some attract additional fees of up to a few hundred dollars a year)
• Other benefits such as insurance, extended warranties and concierge services

Strangely, understanding yourself is more important than the intricacies of fee calculations and reward schemes. What? Let me explain. The biggest driver of costs when it comes to your credit card is whether you carry a balance from month to month or you religiously pay off the balance in full and on time.

It's critical that you understand your own behaviour with credit cards.

If you ever, even occasionally, pay less than the full balance due, then focus on the interest rate. Yes that includes ‘I always pay it off except at Christmas or holidays or when I bought a new TV’.

If you carry a balance only occasionally (like that new flat screen TV), you might want to consider having a low rate card just for those occasions and a more fully featured card for your day to day spending.

What type of credit card user are you?

Emergency Only

If you have a card just in case, or for limited use when you shop online or go overseas and never carry a balance, this is you.  Focus on the annual fee. Everything else is academic. There are a few cards with no annual fees, most issued by credit unions or retailers.

Regular Repayer

You use your card regularly, often daily, spend less than $2,500 a month on average and always pay the full amount due on time. 

Look for a low fee card with a long interest free period and a basic rewards program (without an additional fee).

Check if the annual fee is waived at your expected level of spending.

If you shop online with overseas merchants or travel frequently, look at the fees for currency conversion and for use of overseas ATMs. These can really add up.

Frequent Shopper

You use your card regularly, often daily, spend more than $2,500 a month on average and always pay the full amount due on time. Check if the annual fee is waived at your expected level of spending.

Look for a rewards program that suits your desires (cashback, frequent flyer or other points). Other perks like insurance, extended warranty and concierge services may make an extra fee worth paying. The right rewards program is personal.

If you shop online with overseas merchants or travel frequently, look at the fees for currency conversion and for use of overseas ATMs. These can really add up.

Revolver

You generally carry a balance from month to month and may be looking at a way to get out of debt. The only thing that really matters is the interest rate.  There are usually three rates quoted – one for Purchases, one for cash advances and often a lower rate for balance transfers.

Look for a low ongoing rate (8.99%-14.99%) and generally low fees.

If you are considering a balance transfer, think about how long it will take you to repay your carry over balance. If you are confident you can do it within the period of a 0% transfer (available for up to 24 months), then that is a good option. If you are not, look for a low rate for the life of the transfer – usually available from 4.99%.

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