Understanding Credit Card Offers
The banks are constantly hitting us up with credit cards offers. So how do you cut through the marketing spin and actually figure out the difference between the credit cards and pick the best credit card for your needs?
In order to compare credit cards you should understand the main features found in most credit card offers.
Balance Transfer APR: APR stands for annualised percentage rate and is the equivalent annual interest rate. In this case it represents the rate you will pay on balances transferred from other credit or store cards for the duration of an introductory period such as six or twelve months. Watch out for transfer fees which are normally charged as a percentage of any balances transferred.
Introductory Purchase APR: This is the interest rate that you will pay on purchases for a promotional period once you take out the card. Not all cards offer an introductory rate but if they do, just make sure you know what the interest will revert to at the end of the term and read the terms to ensure you’re not caught out with a big interest charge once the offer expires.
Purchase APR: This is the standard credit card APR charged on purchases. The right card for you is going to come down to how you will use the card; if you’re not going to pay your bills in fill then a low interest card will save you more than you would earn in points, however if you do pay in full then interest won’t be your main priority.
Interest free days / grace period: You may see statements such as ‘up to 55 days interest free’ advertised. This is the time period from making a payment until the bill is due. Look for cards with a long grace period as this will give you a longer period between making a purchase and the due date each month to avoid any interest charges. Some cards have no grace period on purchases and most cards have no grace period for cash advances and in this case, interest is charged from the day of purchase or advance.
Annual Fee: Many cards have now dropped their annual fees but you may find that some premium cards do still charge an annual fee in exchange for extra features. Just make sure that the value of any extra features outweighs the annual costs of owning the card.
Rewards scheme: Rewards schemes come in all different shapes and sizes such as cash back, shopping rebates, points, airline rewards and much more. Do some basic math before you apply and calculate if the rewards your liekly to earn will be greater than the interest and fees. Also choose a card that offers rewards that you want. The value of the rewards for each dollar you spend if normally very low, around one percent so never spend extra money on things you don’t need just to boost your points balance.
Now when you come to look for a new credit card you can cut straight through all that marketing hype appliead to card offers and pick a card that is right for your needs. It’s not possible to suggest a credit card that is right for everyone, the best credit card for you will depend on your needs.
This article is by Richard Greenwood a keen consumer advocate helping consumers getting a better deal. Richard runs www.compareyourbank.com.au
