Bottom Line:
With so many credit card providers, the one you pick can have a dramatic impact on your ability to pay for the things you need and want in life, and your ability to pay off those purchases on time. When shopping for a credit card it is worth considering whether the associated fees you pay to access certain perks outweigh the savings that they offer in the first place.
Key Takeaways:
- Before you start shopping for credit cards, you need to determine how much money you make including your monthly expenses and spending habits.
- If you are concerned about overspending, then settle for a slightly lower than necessary credit limit, as this will help keep your spending under control and ensure that you can comfortably pay off the credit card on time.
- Always remember to stick to your agreed budget, no matter how attractive the introductory period may appear.
- Some of the most common associated fees you may find are annual fee or monthly fees, rewards program fees and other fees such as late repayment fees.
- Contact Debt Fix to assess your financial situation and help you get back on the right track with a solution to manage your debt.
There are a lot of considerations to make when it comes to choosing the right credit card, including, though not limited, to your average monthly income, credit card limit, and whether you desire extra perks like complimentary travel insurance on overseas trips.
But, with so many credit card providers out there, the one you pick can have a dramatic impact on your ability to pay for the things you need and want in life, and your ability to pay off those purchases on time. Here are a few key pointers to consider before choosing a credit card.
Calculate your average monthly income and expenses
Before you start shopping for credit cards, you need to determine how much money you make including your monthly expenses and spending habits. You can do this by using a simple online budget calculator.
Be sure to account for not just essentials like utility bills, food, rent, and mortgage repayments, but also extras like subscription services, transport, car insurance, and any government benefits you may receive. Doing so will help make it easier to compare credit cards and choose the best credit card provider.
Understand the different credit card types
Below is a quick rundown of the most common credit card types you will likely come across.
Low rate
These are credit cards that have a low interest rate and are therefore ideal if you usually do not pay off your full balance at the end of each statement period. They are also relatively basic and straightforward, with no additional perks like rewards programs or complimentary insurances.
Low fee
Low fee cards have little to no annual or monthly account fees and are ideal if you can pay off your balance at the end of each statement period. Just like low-rate cards, they are primarily targeted at those who just want the convenience of a credit card with no rewards programs or complimentary insurances.
Rewards cards
Rewards cards incentivise customers to use their credit card to earn rewards points, which can be redeemed to buy select products such as flights, vouchers, movie tickets, and much more.
Cards with a credit card rewards program often have high interest rates and fees, and eligible customers must already have a good credit score. Also, keep in mind the monetary value of each reward point, as sometimes one reward point will equal one cent.
Premium cards
These cards offer numerous exclusive benefits such as complimentary travel insurance for overseas trips, concierge service, airport lounge access, and heaps more. They also often have their own generous rewards point scheme implemented into the plan. Premium cards typically have high interest rates and fees and are only recommended if you can comfortably pay off your balance each month.
Whichever type of credit card you choose, make sure you compare credit card providers including their rates, fees, interest free days, and whether they offer balance transfer benefits. This will help you choose the best value credit card.
Choose the right credit limit amount
Your credit limit determines the amount of credit a bank or lender will extend to you as a customer. In simpler terms, this is the maximum amount of money you can spend on a given credit card.
Credit limits can vary from $5,000 to $10,000 or higher depending on your credit rating and financial institution. Your credit limit is determined by your ability to pay off the credit card within a set number of years, typically between 2 to 3 years.
Remember, you do not have to accept the maximum credit limit your credit provider offers you. If you are concerned about overspending, then settle for a slightly lower than necessary credit limit, as this will help keep your spending under control and ensure that you can comfortably pay off the credit card on time.
Look beyond introductory ‘honeymoon’ rates and fees
Many credit card providers offer bonus incentives in the form of a zero fee or interest free period, which can last anywhere from 12 to 20 months. On the surface, these incentives are attractive, but they may cause headaches if you don’t pay attention to the fine print.
For example, in the case of a zero-interest period for up to 20 months, it is common to pay interest on any purchases you make during the zero-interest period if you fail to pay off the card before the interest-free period ends. As a result, you may end up with a higher-than-expected credit card debt, one that may
potentially exceed what you would have gotten if you had settled for a basic, no-frills low rate or low fee credit card.
Consider the advantages these perks may offer but be wary of what lies ahead beyond the ‘honeymoon’ period. And always remember to stick to your agreed budget, no matter how attractive the introductory period may appear.
Compare associated upfront and ongoing fees
Different types of credit cards have their own unique upfront and ongoing fees. When shopping for a credit card it is worth considering whether the associated fees you pay to access certain perks outweigh the savings that they offer in the first place.
Here are just some of the most common associated fees you may find:
● Annual fee or monthly fees – The amount you pay per year or month to maintain your account
● Rewards program fees – This is an annual card fee you pay to retain access to your reward program.
● Other fees – These include late repayment fees, fees when using your credit card to travel or shop overseas, cash advance fees for when you take cash out, and fees for going over your credit limit.
Got bad credit or credit card debt? Seek expert confidential advice
If you have bad credit or are struggling to pay off one or more credit card debts, it can feel like the weight of the world is on your shoulders. This kind of financial pressure can lead to countless sleepless nights, worrying about money, and it may impact your ability to lead a normal life
Fortunately, you have options to take control of your finances. By approaching a debt consolidation company like Debt Fix, we can assess your financial situation and may be able to propose a custom solution to help get you back on the right track. These include a credit card debt consolidation strategy, which means converting multiple debts into one single, manageable monthly or fortnightly payment. We may be able to reduce or eliminate the amount of charged interest you pay now, or even propose a credit balance transfers strategy. Each situation is different, and Debt Fix can help determine what’s best for your situation.
Schedule your free, no obligation consultation to get expert confidential advice and contact Debt Fix today.