Money Magazine Feature: 'Choose a Card'

Don’t accept just any old card, says Maria Bekiaris, who has been a financial writer of Money Magazine since 2001.

Credit cards might get some bad raps but used responsibly they have their advantages – they’re easy to use, flexible and you don’t have to carry cash around. But if you want a credit card it’s vital to make sure you choose the right card for you. Making that choice can be easier said than done given there are hundreds of credit cards available.

The first thing you need to do is figure out how you’ll use the card. If you already have a card that’s pretty easy because you have experience. For first-timers it can be tricky but it’s important to be realistic

The biggest issue to consider is whether or not you’ll be able to pay the card off in full every month. Hopefully the answer is yes, in which case you should really be looking for is a card with quite a few interest-free days, or rewards program. This will give you time to pay off the card without accruing interest. The interest rate shouldn’t matter too much because if you pay the card in full you will never have to pay interest.

If you won’t be paying your card in full each month though, the interest rate charged on the card should be your number one consideration. There are plenty of cards out there with rates under 12% p.a. so use that as a guide. Note that many cards charge a higher rate for csah advances so if you’re likely to withdraw money from your credit card frequently, which isn’t really as good idea anyway, look for a card that charges the same rate for purchases and cash advances.

You alse need to think about how often you’ll be using a card. If it’s only occasionally you should probably look for a card with no, or a very low, annual fee. You don’t want to pay an annual fee for a product you hardly ever use.

If you use your credit card for most purchases, and pay it off in full every month, a credit card with a rewards program might be worth looking into. Generally they have a higher annual fee and rate, but according to Canstar Cannex if you spend more than $24,000 a year to get a posititive return this will outweigh the cost of the annual fee. Money Magazine will look at rewards credit cards in their August Issue.

If you have an outstanding debt on another credit card you’re having trouble paying off, you should opt for a card that has a special balance transfer offer, for example 0% for 6 months on balances transferred. If you take an offer like this make sure you find out what the rate reverts to. Also make sure you don’t put any new purchases on the card until the balance transfer has been paid off.

When comparing credit cards here are some of the questions you need to have answered.

• What is the interest rate for purchases
• What is the annual fee
• Will it be waivered if I spend over a certain amount
• Is there a higher rate for cash advances, if so, what is it?
• What is the interest free period (if any)
• Is there a rewards program, and if so, does it cost extra?
• Is there a balance transfer offer, is yes, what is it, and what will the rate revert to?
• Will I be charged a late fee if I do not pay by due date and if so how much?
• If I go over my credit limit, will the transaction be authorised, and if yes, will I be charged a penalty fee?
• What fees will I be charged if I use my credit card overseas?

Management for Credit Card Tips:

Credit cards can work for you if you’re resposible with how you use them. Here are some tips.

• #1 Spend within your means and budget. Don’t buy anything you don’t think you’ll be able to pay off within a few months.

• #2 Always pay more than the minimum repayments

• #3 Make repaying debt a priority. Treat it like a bill that is to be paid by a due date.

• #4 If you think you might get into trouble, make sure you have a low credit limit.

• #5 Always stay within your credit limit, that way you can avoid any nasty penalty fees.

• #6 Don’t accept offers to increase your credit limit.

Canstar Cannex groups credit card users into four different consumer groups – Everyday Spender, Habitual Spender, Occasional Spender and Big Spender.

You can view a complete list at www.canstarcannex.com.au, or compare Australian reward credit cards by the Cannex consumer groups at our rewards card comparison.

Maria Bekiaris is a staff writer for Money who has been writing on a range of financial topics since 2001.

Comparison of our Top Credit Card Offers

		Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual Fee	Cash Advance Rate (p.a.)
Bankwest Breeze MasterCard	A low interest rate on everyday purchases with a low balance transfer offer	0% for 6 months (reverts to 10.99% )	4.99% for 9 months	$49	21.99%
Citibank Clear Platinum Card	A low interest rate offer on balance transfers and purchases	11.99%	0% for 12 months with 3% handling fee	$99	21.74%
St.George Vertigo	An introductory offer on balance transfer and a low annual fee	13.24%	0.99% for 6 months	$55	21.49%
Virgin Flyer Credit Card	Earn 1 velocity point per $1 spent, plus an introductory offer on balance transfers	20.99%	1.9% for 12 months	$50 (for first year thereafter $99)	20.99%
Westpac 55 Day Credit Card	No annul fee for the first year with a low rate on balance transfers and purchases	0% for 5 months (reverts to 19.59% )	3.99% for 6 months	$0 annual fee for the first year ($30 thereafter)	21.49%