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Tips for choosing the right credit card

Woman using bank card

There's no denying that Australia is a nation that likes credit cards. So when choosing a card what should you look out for?

According to the Australian Securities and Investments Commission's credit card debt clock, as of 1 September 2017, Australians have currently racked up nearly $32 billion in debt. This equates to an average debt of $4,200 per cardholder and interest payments of more than $700 per year.

Likewise, according to the Reserve Bank of Australia, Australians made an astonishing 221 million credit card transactions in June 2017 compared to 108 million in June 2007.

So whether this is your first time around the block or you're an existing card user looking for a better deal, you'll want to be well-armed with the information you need to get the deal that works for you.

Here are a few tips for choosing the right credit card.

Do the research

This is the most basic tip, which is why it comes first! The internet has made it easier than ever to not only examine the product offerings of many different providers, but also compare those offerings side by side.

Online, you can get the basic details of products straight from the source by visiting a provider’s website and you can also use comparison websites to see how they stack up.

Remember not to focus on only one element when choosing. Everything should be taken into account, including the fees, balance transfer rate and any rewards the card might offer.

After all, a card might have a low (or no) annual fee, but this might be offset by a higher than average purchase or balance transfer rate.

Consider the alternatives

Many people have the misconception that because major banks are the largest, they must also offer the most advantageous deals, the same way that food is sometimes cheaper in large chain stores.

In the world of finance, that's simply not the case - it's just as possible to find low rate credit cards among smaller banks like P&N.

According to former Customer Owned Banking Association CEO Mark Degotardi, a recent analysis of credit cards (February 2017) revealed that the customer owned banking sector is the market leader on value, despite moves from others to lower some rates.“Our low rate cards provide the best opportunity for Australians to get a better deal,” he said.“Analysis from the Canstar Online Database* shows 11 credit cards issued by customer owned institutions with rates below the lowest rate ANZ card currently available, including some rates as low as 8.99%.“Australians looking for a better way to manage credit card debt should explore the opportunity offered by the customer owned banking model.” *Figures sourced from Canstar Online Database, for standard credit cards (unsecured), excluding premium cards and special offers, 20 February, 2017.

Know why you're getting the card

Before deciding on a credit card, you should know why you've chosen to get one in the first place.

Did you want it to be an alternative to an everyday account - something that you can use every day for smaller transactions? Or is it something you just want for certain products, like extra large expenses or online purchases?

This can help determine exactly what type of credit card you need. For instance, if you're only planning to use your credit card for the odd purchase, there's not much point paying a higher-than-average fee for a rewards card.

Read the fine print

The devil, as ever, is in the detail. Don't get caught out on a product based on clever marketing or a tempting offer that's too good to be true.

If the card is offering a low interest rate, or has a small annual fee, make sure this isn't simply a temporary promotional feature. And if it is, check that the eventual revert amounts don't offset this benefit.

Along with this, find out how much the other fees on the card are - for instance, foreign transaction fees or cash advance charges.

Depending on what you want to use the card for, these can easily add up to an undesirable expense.

Get the card that fits your habits

Your card shouldn't just fit your spending habits - they should also match your behaviour as a debtor.

Balance transfers work really well for people who pay off their card in full.

For others who like to pay back smaller amounts each month, a card with a lower ongoing rate may be a more attractive option to consider. Doing this will help you stay out of interest trouble.

P&N has a low credit card rate for your purchases, with two options – Visa Classic and Visa Platinum. So whether you want a 'no frills' option or platinum benefits, you can choose the credit card that's right for you.

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