Different types of credit cards

Whether you use a credit card to buy your daily coffee, to travel overseas, or only have it on stand-by to cover unexpected car breakdowns, it’s important to consider all the pros and cons of different credit card features to see which one  suits your needs best. Here we breakdown the different features, what they actually mean, and how you could use them to your advantage.

Low rate credit cards

Every month, we receive a credit card statement which tells us what our credit card balance is. If you find yourself paying the minimum amount required instead of the full balance every month, then being on a lower on-going purchase rate could be a good option, as this will mean you pay less interest on your remaining balance.

Low rate credit cards are usually no-frill cards, in that you don’t earn reward points. They are great for bigger one-off purchases, which you could pay down over time rather than using your card for every day spending.

Rewards, rewards, rewards

It’s becoming more common to use a rewards credit card to accumulate points as you spend. If you plan to use your credit card for everyday purchases and pay off your balance every month, then a rewards credit card could be for you, so you accumulate points as you spend.

Reward cards differ in the rate you accumulate points, and some cards will even have annual bonus points to boost your point balance.  It’s important to know that rewards credit cards usually have higher interest rates than other cards so it’s important to pay your balance at the end of each month. There is usually different types of cards available depending on your credit card limit.

"Reward cards differ in the rate you accumulate points, and some cards will even have annual bonus points to boost your point balance"

If you’re a frequent flyer with an airline, having a card that can help you build up points can be a benefit. You could find yourself with free flights or accommodation and access to airline lounges.

If you’re not a frequent flyer, there are cards that reward you too. These cards will have a rewards website where you can make purchases with your points, ranging from clothes and houseware to travel vouchers. Depending on the card, you could also have access to a range of different airline lounges when you travel.

No annual fee

Annual fees on credit cards differ depending on the card you have and can add up over time. Getting a card without an annual fee could save you hundreds of dollars.

If you pay off the balance every month, then you can avoid paying interest on your purchases. Without an annual fee, you’ll only spend your money on things you want to.

No foreign transaction fees

Most of us love to travel or buy things online… or let’s be honest, both. On most credit cards a fee applies whenever you make a purchase that involves an international transaction, even if you’ve bought it online from the comfort of your lounge. Basically, if the item you’ve purchased is from overseas, a fee may apply. 

"If you like to travel and shop online, keep an eye out for these features to save yourself money and stay secure while you’re overseas"

On your next overseas trip, foreign transaction fees add to the overall cost which can make your holiday a bit pricier than you budgeted for.

Some credit cards now offer no foreign transaction fees, along with other useful traveling features like free travel insurance, and worldwide card replacement if you lose it while overseas. So, if you like to travel and shop online, keep an eye out for these features to save yourself money and stay secure while you’re overseas. 

Balance transfer offers

To keep it simple, a balance transfer offer allows you to transfer the balance of your current credit card to a new credit card at a lower interest rate, for a set period of time. You can pay off your balance faster since you won’t be charged a high interest rate.

There are a lot of other things you should consider when transferring your balance.

When it comes to finding a credit card, think about how you might use it and how you might make repayments. Whether you’re looking for a credit card for travel, the unexpected or for everyday spending, you will be looking for different features. In the same way, if you plan on paying the full balance every month, or slowly pay it down, it should influence the card you pick.

So make sure you read all the details of the credit card offering before applying to make sure it’s the right credit card for you and your situation.

Things you should know

The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. To the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48123123124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accepts no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.