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Comparing Credit Cards

By Richard Greenwood

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Published: 07Jan2009
Word count: 643
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Many Australians have made credit cards a key component in the management of their finances. There are well over 14 million accounts (both credit cards and charge cards) issued to Australians, according to the Reserve Bank.

The Australian card market has become so large, and the various rewards schemes on offer are said to probably be the most diverse in the world. In an October 30, 2008 interview, the Prime Minister said that his latest information indicated there were about 500 different products with a bewildering array of features. The PM said interest rates appeared to vary from somewhere around 8 per cent to as high as 28 per cent.

This only underlines one thing: credit card comparison is an extremely important thing to do. Failure to make card comparisons and look for the best credit card for their particular circumstances could cost consumers a small fortune.

The terms and conditions will differ from one card to another; the best card for one person is not necessarily so for another. It is important to evaluate many factors when shopping around for the best credit card deal. Among the key points are interest rate, fees and charges, benefits to members and rewards programs.

Types of credit card: The most common types of cards low-interest cards, rewards program cards, balance transfer/zero-interest cards, no annual fee cards, and premium cards.

* Low-interest credit cards offer substantially low rates to those who prefer to carry a balance on their account instead of paying off in full their entire balance. The low rate applies only if payments are made on time, else a much higher rate will kick in.

* Rewards program cards offer the chance to earn bonus points and cash-back benefits. This is most useful to people who pay in full the amount due for each month. Failure to do so negates the benefits of the rewards. Understand that rewards points come only when there are purchases made: one must spend a lot of money first.

* Balance transfer cards give the opportunity to transfer balances from higher-interest cards to lower interest, or even zero interest. There is usually a period specified for paying off the transferred balance, after which a higher regular interest will apply on any remaining balance.

* No-annual-fee cards do not charge any annual fee.

* Premium cards (the ones with metallic names - gold, platinum, titanium) offer a comprehensive set of benefits like free travel insurance, generous rewards schemes, and much more. Their annual fees are substantially higher than regular cards. People who travel often find premium cards very useful.

Interest rates: The finance charge is the major sticking point in cards. The range indeed varies from low single-digit rates to the near-30s. All cards in Australia give a 55-day interest-free period.

High interest will not matter to people who pay off their entire balance every time, because of the interest-free benefit. For them, the best credit cards will be those with the most generous rewards schemes.

Low interest is important to people who carry a balance, because this rate determines the continuing interest expense. For them, it is important to take note of cards that have a low promotional introductory interest rate - which may last for several months - and then leap to a higher rate after the promotional period expires.

Interest rate on cash advances will be set at a higher level than the normal interest rate (which applies to purchases). Interest rate for late payments, penalties and other items will also be different.

The best credit card deal will depend a lot on the person's circumstances and card usage habits. The credit card comparison exercise will try to match those circumstances with the unique terms and conditions in each card. Only when a good match is found should an application be filled out.

This article is by Richard Greenwood of credit card comparison website click4credit.com.au which compares financial products from leading issuers in Australia. It also improves Visa debit card offers.

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