What card will you choose this Christmas?

Christmas Presents

With Christmas just around the corner, shoppers are expected to spend big on gifts, entertainment, food, drinks and holidays. Typically people spend more on their credit card during December and this can lead to higher debt and interest repayments in the post Christmas period.

Infochoice.com.au is determined to help you save money and find the best credit card deal in the market.

Types of credit card users

People who don’t pay off their credit card balance in full each month are referred to as ‘revolvers’ as they continually have an outstanding balance and are charged interest on the balance each month. A revolver typically only pays the minimum monthly repayment each month so they incur a greater amount of interest on their balances each month. Therefore the rates of interest charged on their credit card should be a key factor in their card selection.

People who use their credit card regularly and manage to pay off their balance in full every month are known as ‘transactors’. They are rarely charged interest because they typically have no outstanding balances at the end of the month. As such the rates of interest charged on their card is of little concern to them and often these customers look for cards with plenty of features or with a good reward scheme.

What type of card should I look at using?

Low rate cards

With purchase rates ranging widely from 10.49% to 21.49%, it is almost essential to find the right card that will save you interest. Using a low rate card is especially important if you are a revolver and don’t pay off your monthly balance in full as you want to minimise the amount of interest you are paying. For these people selecting a low rate card is more important than having a card with a reward program or interest free period.

Depending on how you use your card different rates of interest will be charged. The advertised rate is typically the purchase rate, which is charged when purchasing goods and services. A higher rate is generally charged on cash advances from the bank. These cash advance rates can be around 22 per cent, and keep in mind that interest is charged immediately on cash advances.

InfoChoice.com.au's Top 3 Low Rate CardsPurchase RateCash Adv. Rate
mecu Low Rate VISA10.49%10.49%
SCU Low Rate VISA Credit Card10.49%10.49%
Bankwest Lite MasterCard10.75%21.99%
Compare more low rate cards  

Introductory rate offers

Some providers are offering shoppers access to low introductory rates on their cards. These credit cards will generally offer customers a much lower rate of interest for a certain period before the rate reverts back to the normal rate.

You need to control your spending habits during the intro period so that you aren’t left with a huge debt at the end of period which generally will attract a much higher interest rate. People can often get carried away and over spend during the intro period believing that purchases are not costing them much at all.

InfoChoice.com.au's Top 3 Intro Rate OffersIntro RateIntro Period
NAB Low Rate VISA Card0.00%6 months
Westpac 55 Day Card0.00%5 months
Bankwest Lite MasterCard5.99%12 months
Compare more introductory rate offers  

Balance Transfer

If you find yourself with a large balance on your existing credit card after Christmas a new card that offers a zero or low interest balance transfer rate might just be what you are after. Shifting your outstanding balance from an existing credit card to a new one can work wonders if you are smart.

For a savvy consumer, a credit card offering a zero per cent balance transfer rate can be an effective method of minimizing interest charges. To make a balance transfer card work for you it’s best not to use the new card for future purchases and make sure you pay off the balance in full at the end of the balance transfer period.

InfoChoice.com.au's Top 3 Transfer Rate OffersTransfer RateTransfer Period
Suncorp Clear Options Plus1.90%15 months
ANZ Low Rate MasterCard2.90%12 months
Citibank Clear Platinum Card0.00%6 months
Compare more balance transfer offers  

Rewards Cards

Shoppers who pay off their credit card balance every month in full can look for a card that offers great features and rewards as the interest rate is of little importance to them.  Some cards provide travel offers, access to rewards points, insurances and extended warranty on purchases however they generally have high interest rates and annual fees associated with them.

It is important that you do some homework on the various cards available to you in the market. Often shoppers will be required to spend over a certain amount each year in order to get a real benefit from using a rewards card so it’s important to consider what your month spend is on average. Rewards programs and card features vary greatly within the market and you should pick a card that matches your lifestyle and needs so you get the most of it.

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Published: 11 November 2010

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