Comparing Credit Cards

Comparing credit card offers may sound difficult with so many competing cards on the market but the internet can make your life easier. How do you start?

It will help a lot if you first figure out the reason for obtaining a card before you start to review credit card offers. The best credit card for you is the one that most closely fits your spending and lifestyle so think carefully about this. You can now use these to check how well each card meets your needs.

In looking for the best credit card deals, these things should be considered:

Interest rate. Look particularly for the rate that will be used to calculate the finance charges every billing cycle. Pay close attention to the default interest rate — the rate imposed when payments are late and credit limits are exceeded. This is higher than the nominal interest rate or APR.

The Balance calculation method. If your going to carry a balance each month you not only need to aim for a low rate card but also check how interest is calculated. The methods that produce the lowest interest are the adjusted balance and average daily balance excluding new purchases.

Balance transfer opportunities. Offers of very low introductory rate for a specified period are intended to entice you to transfer balances from a competing credit card. This usually reverts to a higher interest rate after the period, so find out how high that rate will be. Using a credit card comparison website allows you to sort cards by interest rates.

Annual fee. The range of annual fees varies widely. Be zealous in your credit card comparison to look for the least fee. Saving money on one feature such as no annual fee might be off-set somewhere else such as higher APR so check the offer with care.

Cashback. Cashback is a common reward type and can vary from around 0.5% right up to 3%. While it’s great to get the effective discount of 1% it will be wiped out many times compared to paying 14% interest on an outstanding balance.

Late payment and other fees. If your payment comes in late, even for just one day after the due date, you’ll get hit with late payment fee. There are other fees for violations against card usage rules. Credit card comparison is very important to look for the cards with the lowest penalty rates, over-limit fees, and other fees.

Rewards. The best credit card rewards programs require the least number of points to redeem the item you want. Aim for a card that gives bonus rewards at stores where you already shop the most.

Credit Limits. Check how much credit will be allotted to you. Credit card comparison is needed against the amount of purchases you expect to charge to the card on a regular basis. You don’t want to be exceeding the credit limit. To allow for a buffer and the fact that you have some time to pay your credit card bills you should aim for a credit limit at least twice your avaerage monthly usage.

Foreign transaction charges. If you travel a lot and expect to use the card a lot overseas, check out and compare the applicable fees for foreign transactions and foreign exchange differentials.

Cash advance charges. Interest rates and transaction fees for cash advances are usually much higher than normal purchase transactions. Making cash advances should be avoided but it’s worth checking the fees in case you ever have to use it.

Editorial by Richard at click4credit.com.au who compare products including Woolworths credit cards.