Sometimes I think credit cards have been designed to be confusing and this makes it hard for you to choose the right one.

As a financial adviser, I don’t want a credit card to be ripping cash off my clients or readers, so when I want to find a good credit card, I start with the interest rate, then the fees and the interest-free period. The rewards program should be looked at but I’d rather add that on last, as a sweetener, or to separate two cards that might be close by comparison.

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You might eventually look at other offerings, such as discounts on some goods or attractive insurance products but sometimes these mask higher charges. If you select the right credit card, you could have so much savings that you can shop around for better discounts and even better insurance deals.

Use your search for the best credit card to inspire you to get the best money product in all aspects of your life, from home loans to car leases, transaction accounts to term deposits and even super funds!

Let the search begin.

To start a search, use www.ratecity.com.au and go to the section on “balance transfers”. When I did this on your behalf, I found the best one was Citibank with 0% for six months on the balance transferred and 11.9% ongoing. The card came with a 55-day interest free offering and therefore is a great starting point for a basis of comparison. But hear my words here – this is your basis for comparing other cards on offer.

The website www.creditcard.com.au rated Citibank’s Clear Platinum Exclusive card as the best despite its $49 a year fee. And that’s an issue you need to consider on top of the actual interest rate on the card.

The website www.infochoice.com.au showed Virgin’s credit card at 10.99% was the lowest in town but let’s have a look at what else comes with the card. There’s a 2.9% p.a. balance transfer rate for the first 9 months, reverting to the cash advance rate of 21.69% after 9 months. You get up to 44 days interest free but it’s not available if you have any outstanding balance and there’s an annual fee of $99.

Also check out www.moneyhound.com.au. Its number one credit card was from HSBC and had a 0% balance transfer rate for the first eight months and 55 days interest free with a minimum repayment of 3% or $20.
The size of the annual fee can really change the interest rate you pay annually. For simplicity, let’s say the rate is 10% and the fee is $99 and you borrow $5,000 on your card. The interest bill is $500, which is 10%, but with the fee the real cost is $599 and that’s an 11.9% real rate of interest. The lesson is — watch those fees.

Getting cash costs

Also, in case you didn’t know, cash advances on credit cards are an act of madness, as interest rates are generally over 20% and the charges start from day one when you draw down the cash.

Comparing interest rates and fees

When choosing a credit card, it's very important to make a comparison between the different interest rates and any fees that will be charged. This is where you need to take into account your specific spending habits.

I’ve known people who have used the low interest rate on transfers and the 55-day free interest periods to make credit card usage very economical, but they’re really organised people. They also read the fine print before signing up for a card, so they know when they have to pay off their balances to avoid an interest charge.

The devil’s in the detail

On that note, if you already have a card, try reading the fine print that comes with the card. Once you know it all, then start looking for better cards with lower rates and then read the fine print again! That way you can avoid being a credit card patsy who will pay out a lot of money over a lifetime of credit card usage.

Finally, after you have found the best card, then start making comparisons about rewards and points programs. These should be an added value issue for you. If you let these determine your card selection, while you might go for a few plane trips on your points, your card provider could take you for a very, very long ride!

Top five credit card tips

- Find out the interest rate, fees and interest-free period on a card, then compare it to a number of different cards.

- Rewards programs and other discounts are only an added value issue. Only make comparisons on these after you have found
the best card for you.

- Read the fine print thoroughly on each card you are considering.

- Don’t be hassled into choosing one credit card over another. Work out which card would be best for your lifestyle and spending habits.

- Read as much information as possible about credit cards to ensure you know what you’re getting into.

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