Credit Card Comparison is a great way of accessing the merits of each of the credit cards available, and also checking the competitiveness of any current cards you might hold, against the deals currently on offer.
To effectively compare credit cards you will need to understand the key facets of each of the credit card types available, this will also help you identify the credit card types that best suit your circumstances and intended card usage.
The credit card types available within Australia fall broadly within 6 categories:
- Balance Transfer Credit Cards
- Rewards Credit Cards
- No Annual Fee Credit Cards
- Low Interest Credit Card
- Student Credit Cards
- Business Credit Card
How to Compare Balance Transfer Credit cards
A balance transfer credit card is one that lets you transfer your balances (the debt) on other credit or store cards to it, where you would then make monthly payments on the debt.
While the total amount you owe remains the same, the interest savings you can potentially make are significant because balance transfer credit cards key feature is that they charge low interest rates for a fixed period of time. Once the fixed period of time, or balance transfer period ends, you will have to pay higher interest on any remaining debt, until the balance is fully paid.
The primary features to consider when comparing balance transfer credit cards are the Balance Transfer Interest Rate, Balance Transfer Period, Balance Transfer fees and the Rate to which the card reverts at the end of the balance transfer period.
Balance Transfer Interest Rate - The interest rate applied to the balance transferred. For any transfer to make financial sense the balance transfer rate needs to be significantly below the interest rate you are currently being charged against the debt. Typically Balance Transfer rates are below 3% p.a. with deals going as low as 0% p.a.
Balance Transfer Period - The period of time for which the balance transfer rate applies, this usually ranges between 6 and 24 months.
Balance Transfer Fees - This fee will be in addition to any annual card fee and is usually calculated as a % of the balance to be transferred. The normal range for this fee is between 1-3% of the balance to be transferred. In some circumstances this fee is fixed and made as a one off payment at the time of making the transfer.
Revert Rate - At the end of the Balance Transfer period any amount that remains of the original debt transferred will become subject to a higher rate of interest, which will be either the Purchase Rate or Cash Rate of the Credit Card. These rates will be significantly higher than the balance transfer rate and will attract hefty monthly interest charges and so must be considered when comparing the balance transfer credit card options.
A further couple of non-price related considerations should be included when selecting cards for comparison:
- Understand which providers you are able to transfer your balance to mindful that each provider will not transfer to all others and no provider will allow a balance to be made to another card within its own portfolio of cards.
- To qualify for balance transfers providers often include very specific timing on when the balance must be transferred by, this maybe at the time of application or within a designated time post the acceptance of your application, or receipt of your card.
To calculate the savings you could make on interest by switching your current card to a new credit card with a balance transfer offer try our free balance transfer calculator
How to Compare Rewards Credit Cards
Rewards credit cards are focused on rewarding cardholders for making purchases with their card. The more you spend on your card the more reward points you earn, and in turn, the more valuable the rewards you are able to acquire through points redemption.
The primary features to consider when you compare credit cards offering rewards are the Points System, The Rewards on offer, The Points Redemption Rate, Purchase Rate, Annual fee/Rewards Fee and the presence of any caps or expiry conditions on rewards points.
Points System - Reward Points are earned when you make a purchase with your card. Each card will have a specific “earn rate” which defines how many Reward Points you earn for each dollar spent. As a benchmark 1 point per $1 spent is in the mid range of earn rates offered by Australian Reward Credit card providers.
In conjunction with the “standard earn rate some cards also offer increased earn rates when you make purchases using your card at certain “partner” retailers, this can often see your earn rate double for each dollar spent.
A recent innovation has been the introduction of “companion cards” which sees you have 2 cards for the one account to enable you to maximize your point earning potential. So for Example you will hold an AMEX card and a Visa card, with each of the cards offering different point earn rates for different types of purchases. An example might be overseas purchases where AMEX tends to offer significantly higher earn rates than either Visa or MasterCard.
The Rewards on Offer - all Rewards Credit Cards work on the basis that at some point in time you will wish to redeem your points for a Reward. The rewards available broadly fall into 5 categories:
- Travel Related Rewards offer the ability to redeem your points for a plethora of travel services including airline tickets, hotels bookings, flight upgrades, travel insurance and package holidays. If you are a frequent traveller the credit cards aligned with the major Airlines are an option worth considering, as they not only provide travel redemption opportunities but also include redemption opportunities across the majority of the other categories below. The 3 major airlines offering these rewrads programs are Qantas Rewards, Velocity Rewards and KrisFlyer Miles.
- Gift Cards from many of Australia leading retailers are offered across many of the Card Reward programs, retailers include Myer, Westfield, JB HI Fi and Harvey Norman.
- Cash Back allows you to redeem points for cash that is generally credited back to your credit card. The ability to redeem for cash only kicks in once you reach a minimum points balance that varies by card provider.
- Merchandise ranges offered within Credit Card Reward cards are extensive with literally thousands of goods offered in the leading reward programs run by Qantas, Virgin, Westpac and ANZ. These Reward stores include Technology, Home and Garden, Baby and Kids, Beauty and Fashion, Sports and Wine offerings comparable with your local shopping centre.
- Charity Donations can be made by donating your points to a range of charities who have partnered with the Reward Point programs.
When making your comparison of the Reward Credit cards you should ensure that the redemption opportunities match your interests and requirements.
The Points Redemption Rate of the points you can vary significantly by program, so for example one program may offer a JB Hi Fi $50 gift card for 5,000 points while another Reward Program may require 8,000 points for the same $50 gift card.
The Purchase Rate of Rewards Cards tend to be on the higher side so it is important to access the value of potentially paying higher interest on any outstanding balances, versus the value of any rewards.
Annual Fee and Rewards Fees are commonly charged by Reward Cards on an annual basis, which should be accessed relative to the value of any rewards you will be earning across each year. Many cards offer introductory offers where the fees are waived for the 1st year, but be aware in year 2 all the fees are charged at the start of the year.
Conditions Associated with Reward Points include monthly caps which limit the number of points you can earn across a defined period, usually monthly or annually and expiry periods of points whereby the points you earn may expire after a defined period of time. On a more positive note many Reward cards offer introductory offers of “bonus Points” which are awarded following application and initial purchase hurdles, such as make a purchase within 3 months of holding your new card.
How to Compare No Annual Fee Credit Cards
When No Annual Fee Credit cards where first launched they tended to be cards that sacrificed benefits, for the no cost of holding the card. This no cost proposition resonated with the Australian consumers and became very popular very quickly, which lead to the “no fee” proposition being used more widely with various conditions attached.
Selecting a No Annual Fee card requires careful comparison of these conditions, and the range of benefits that are now increasingly being included with these cards.
How long is the No Annual fee for? This is a critical question as not all no annual fee cards are made the same. True No Annual Fee Credit Cards guarantee that they will never charge an annual fee for the life of the card, whilst the newer breed of No Annual Fee Cards offer the $0 fee for a limited time, usually for an introductory period of 12 months, following which an annual fee is charged.
Benefits worth considering which are increasingly available with true no annual fee cards are Interest Free Days on Purchases, Balance Transfer deals and Rewards Programs most notable from American Express
The Purchase Rate of No Annual Fee Credit Cards tend to be in the mid range so it is important these accessed in conjunction with the waiving of any annual fees, as any interest charges on outstanding balances will soon wipe out any positive impact of no paying a card annual fee.
How to Compare Low Interest Rate Credit Cards
While there is no definite standard set for the Low Rate Credit Card, any card with a Purchase Rate of below 15% p.a. is generally considered a Low Rate Credit Card. It is important to note the Low Interest Rate these cards advertise is the Purchase Rate, with the other rates (Cash Advance and Balance Transfer) very much taking a back seat, but certainly important in any comparison of low rate cards.
Low Interest Rate Cards are favored by customers who tend to carry a balance over on their card each month, and wish to minimize the monthly interest costs of this balance.
The Low Interest rate offered by these cards is the first factor to compare, remembering that this interest rate is actually the purchase rate, so the rate applied to any purchases made on your card which may exclude certain types of purchases, such as utility bill or ATO payments.
Low Introductory Rate or Ongoing? A True Low Rate Credit Card is one that provides an ongoing Purchase Rate below 15% p.a.
Some cards may fall into this Low Rate bracket during an Introductory Period, during which they offer a Low Rate, but then post the introductory period rises well above the 15% p.a. rate.
Annual Fees are normally charged by Low Rate Credit Cards, so should be accessed relative to the features each card is providing.
How to Compare Student Credit Cards
Student Credit cards have been designed in the knowledge that students are focused on their studies, having fun and managing a tight budget. The eligibility criteria to apply for a Student Credit Card have lower thresholds than other card types as the card providers understand that you won’t have a massive monthly income and that you don’t have mountains of cash stashed in your bank account.
Comparison of Student Credit Cards starts with accessing the eligibility criteria of the cards as there is no point applying for any cards that are going to reject you based on not meeting these publicized criteria. Typically these criteria include a minimum annual income level, proof that your registered with a higher educational establishment in Australia, you are 18 years of age and are an Australian Resident.
Having established the Student Credit cards for which you can meet the eligibility criteria the next step is to compare the costs of each of the credit cards, the key costs to be considered are Fees, Purchase Rate and Interest Free Days.
Student Credit card Fees - The first fee to access is the Annual Card Fee that is charged by the Card Providers at the point you receive your card and then on the anniversary of this date. The fee for a Student card is on average is around $50 per annum, but deals are frequently offered by the Card Providers that see this fee waived for an introductory period (usually the first 12 months) so look out for these. Two other fees to be aware of are the Over Limit and Late Payment Fees that are charged when you fail to make your monthly payment on time or spend beyond the monthly credit limit set on your card.
Purchase Rate - This is the % rate of interest you will get charged on any debt your do not pay off on your credit card on the due date, the rate tends to fall between 10% p.a. and 15% p.a. The objective when comparing the purchase rates is to find the card with lowest purchase rate and then make sure it also has a low annual fee, as a combination of a low purchase rate and a low annual fee is a great combination.
Interest Free Days - This is the period commencing on the first date of your statement cycle plus the number of interest free days offered by the credit card. What is means is that your payment for that statement cycle is not due until X days post the 1st date of the cycle which means you pay no interest on any purchases made during that period so long as you settle the account on or before the interest free days have lapsed. You are essentially looking for most interest free days that on Student Credit Cards tends to be 55 days.
How to Compare Business Credit Cards
Comparison of Business Credit Cards starts with the costs associated with using the card, followed by an accessement of the cards features to ensure it meets the businesses needs, which may include requirements such as multiple card holders, different credit limits for card holders and seamless importation of card statements into the businesses accounting systems.
Purchase Rate - If credit balances are not going to be cleared each month it is important the Purchase Rate is competitive as this will determine the amount of interest which will be payable on any balances outstanding.
Cash Advances - If the Business Credit Card is going to be used to acquire cash the Cash Advance rate will need to be compared as this is the interest charged for any cash advanced using the card. An important point to consider on Cash Advances is that the Interest Charge normally commences on the day on which the withdrawal was made and so no interest free days apply across cash advances.
Annual Fee - On Business Credit Cards the annual fees cover a very broad range as the cards offer a broad spectrum of features. Cards do exist which attract annual fees below $100 but the majority are in the $100- $200 range. It will also be important to compare the rates attached to additional cardholders if your plan is to issue cards to a number of employees.
Interest Free Days - The ability to delay paying the balance on the credit card may assist in cash flow so interest free days should certainly be considered in the comparison of the Business Credit Cards. A point to look out for is that cards with lower interest free days tend to have lower annual fees so be sure to balance the benefits to your business of each of these characteristics.
Rewards Program - Businesses are one of the most frequent users of credit cards and represent a large proportion of the dollars spent on Credit Cards so consequently the opportunity to earn rewards points is significant. A number of Business Cards do offer Rewards Programs, many with rewards which would be handy to businesses such as flights, hotel accommodation, Technology Products and gift vouchers for many of the high street retailers.
Most Compared Credit Cards with Introductory Offers
7,500 Velocity Points Full Card Details >>
75,000 Qantas Points Full Card Details >>
50,000 Bonus Velocity Points Full Card Details >>
Balance Transfer 0% p.a. for 18 months Offer closes: 11th October 2017 Full Card Review >>
0% p.a. for 12 months on Balance Transfers Offers close: 30th March 2017 Full Card Review >>
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