Credit cards can be a helpful way to pay for everyday expenses when used responsibly whilst taking advantage of benefits such as rewards, frequent flyer points, cashback offers, and travel insurance. With hundreds of credit card options and different features available, you have a good chance of finding a card that matches your individual requirements. Start by knowing the common features offered by credit card issuers and exploring which benefits best suit your lifestyle, income level, spending habits, and credit situation. 

Features and Conditions to Look Out for In A Credit Card

Interest-Free Periods

Most cards have an interest free period. Provided you always pay off your entire credit card balance at the end of every billing period, having a card with an interest-free period (55 days or an extra 25 days on top of the 30-day billing cycle is common) offers you greater flexibility and benefit than a card with no interest-free period. These cards tend to have higher annual fees, but they can work out to be cheaper in the long run, as long as you pay off your balance in full to not get stung by interest. Some providers also offer the benefit of aligning your statement cycle with your preferred dates, which is a great feature that can allow you to space out big bills. If you're diligent and disciplined, this feature may be for you. 

No Interest-Free Period

Cards with no interest-free period are more suited to those who tend to roll over debt each month. These cards have lower annual fees and lower interest rates than those with interest-free periods. 

Introductory Periods aka Honeymoon Rates

Some cards offer honeymoon rates – lower than average interest rates during the credit card's introductory period (usually six to twelve months) - for new account holders. This can be a handy feature if you have pre-existing credit card debt, as it can give you some financial breathing space provided you pay off your balance in time. Some even offer a 0% interest rate – but be careful not to be lax about paying your balance off during this period. If you intend to roll over debts from month to month, be aware of the reversion rate after the honeymoon period ends and how much interest you will be charged once the initial period is over.

Balance Transfers

You can transfer an outstanding balance from one credit card to another if the latter has a lower interest rate. Balance transfer terms usually offer a more attractive rate for a short period of time (such as 6% for the first eight months, or sometimes even 0% for an initial period), but like honeymoon rates, be aware of the interest rate that the account will default to after that. Balance transfers can be a great way to save on interest if you have existing credit card debt that you can't pay off at your current interest rate. Just be sure to put forth a significant effort to pay down your credit card debt once you have successfully completed the balance transfer. 

Store Cards

Store cards are offered by individual merchants for shopping within their stores only. They tend to have much higher interest rates, but they sometimes come with additional discounts or benefits for holders. Store cards are ideal if you shop at a particular store regularly and the members benefits are attractive for you.

Rewards and Discounts

Some cards offer reward scheme benefits or discounts such as frequent flyer points or discounts for shopping with partner organisations, but always review these benefits in the context of any higher interest rates, annual fees, and other charges.

Cashback Cards

Some credit cards give you credit back on your account after you spend a certain amount. However, check that you are really benefiting rather than spending more by reviewing the interest rate and fees and working out how much you are likely to charge with the card.

Fees and Charges

Fees and charges are the key conditions to check when shopping around for a credit card. Ensure you take the time to find out what annual fees you will pay and what extra charges could potentially be levied. Take a detailed look into the interest rate charged if you don't pay off your balance in full each month.

Credit Card Versus Debit Card

Credit cards allow you to make purchases based on your credit limit, while with debit cards pay for goods and services with money in your savings or cheque account. Research shows that credit cards encourage people to spend more than they would when paying with cash. Think carefully about whether a debit card might be the better option for you, especially if you think you might end up spending more than otherwise.

How to Compare Credit Cards

An easy way to quickly compare credit cards is to request a key facts sheet on the specific credit card product from the issuer. The key facts sheet will give you information on the minimum repayment and how it's calculated on the card; and the interest rates that apply to cash advances, purchases, and balance transfers. It will also tell you the promotional interest rate, the duration of any interest-free periods, and any annual and late-payment fees. Credit card comparison websites are another way to quickly compare credit card products - but be aware that these sites usually contain sponsored content and promotions, and they will feature some but not all the credit card products available on the market.

Focus on Overall Value and Your Requirements

In simple terms, there are really just two types of credit cards (secured credit cards are rare in Australia): cards that help you save on interest and cards that come with rewards. If you carry over a balance and have substantial credit card debt, a card that's lower in interest without rewards and additional benefits is probably more suitable for you, and all the better if you can find a card with a zero-interest balance transfer offer. Suppose you pay off your balance every month and are more interested in a card for the convenience of easy purchases and transactions. In that case, it's probably better to go for a card with a reward program, as you don't need to worry about interest rates. Furthermore, the number of rewards that you receive may somewhat justify your spending. In addition, consider your lifestyle and habits.

• Frequent Travellers
  If you are a keen traveller, a card with a frequent flyer point program with extra features such as free travel insurance and reduced foreign currency charges could be best.
• Groceries and Shopping
  Cashback cards are great if you use your credit card to buy groceries, pay for petrol, and purchase at department stores. In return, you could be earning as much as 5% cashback for certain purchases.
• Small Business Owners
  If you're a small business owner and you use your credit card for your business, you can find one that offers additional features that help save time. These can include receipt tracking, expenditure reports, and extra business-related rewards.

At Credit Counsellors, we don't believe that money is the root of all evil, and neither are credit cards. For many people, they are simply a convenient way to take advantage of perks they wouldn't otherwise get, spending money they're going to spend anyway! However, unfortunately, some people get in trouble with credit card debt, and it's usually because they've suddenly lost their job or have overspent unintendedly. Whatever the reason, we're here to help! Suppose you are struggling with credit card debt and you don't know how you're going to repay it in a reasonable time. In that case, we can figure out your options to help you find the best debt solution for your circumstances. Call us on 1300 003 328 for a free and confidential debt assessment to get started on your debt-free journey.