How many of us actually know anything about credit cards? Other than the fact that we want them and that they are good for paying for material things. However, being proactive with your finances is something that will yield long-term benefits over time.
Think about it. Why did you choose your current credit card?
More often than not, it’s because it was the card someone you know had, the default option at the bank, or maybe it was even chosen entirely on a whim. There are many different types of credit cards on the market: low-rate cards, balance transfer cards, low annual fee cards, cards linked to rewards or frequent flyer schemes, not to mention business credit cards!
To find out which card matches your current needs, you’re going to need to do a bit of research. A good place to start is by learning more about the types of credit cards on the market. Then, read on to learn about the various types of credit cards explained in layman’s terms. Similarly, this research paper from the Reserve Bank of Australia is a good (factual) read.
The good news is, we researched the main types of credit cards on the market so you don’t have to!
Rewards and Frequent Flyer Credit Cards
If you want a card that rewards you for every dollar spent, then this type of credit card is for you! You can either work for your money or have your money working for you and with a rewards or frequent flyer card, that’s exactly what you’re getting – rewards for how much you spend.
The main factor that attracts customers to these sorts of cards is the ability to enjoy exclusive rewards and save on flights, accommodation and so much more while traveling. So if you see jet-setting and big spending in your future then this is for you!
Low-Rate Credit Cards
This category of credit card offers low-interest rates for purchases that you make. Low-rate cards make a great starter credit card and are the perfect transitional step for someone looking to move on from a debit card or Electronic Funds Transfer at Point of Sale (< a href="https://en.wikipedia.org/wiki/EFTPOS" target="_blank">EFTPOS) card to something with a little more purchasing power. They are low-cost and carry relatively low-risk.
Balance Transfer Credit Cards
Balance transfer credit cards can help you get a handle on your debt and reduce the fees you have to pay on the overall amount you may owe on other credit cards.
So what is a balance transfer? At the most basic level, it is the process of transferring the balance (the amount that you owe) from one credit card onto another card so that you can benefit from an introductory period of much lower interest rates. In theory, these cards allow you to consolidate your debt and reduce the amount you pay in interest rates.
PRO TIP: Once you have performed a balance transfer, stop using the old credit cards!
Many balance transfer credit cards have fees so please read each card’s product disclosure statement carefully.
Low Annual Fee Credit Cards
With low annual fee cards or no annual fee cards, you get exactly what you would expect – low or no annual fees! When choosing a credit card, you should consider your spending habits but, if you spend an average or slightly above-average amount per month, a low annual fee card might be the perfect solution for you as many of these cards will waive the annual fee entirely for the first year and then keep the fee as low as possible from that point forward. The only catch? You have to spend up to a minimum amount every month to be eligible for the special low fee.
Get a Business Credit Card
Then there are credit cards aimed at business owners.
Are you a new business owner? As you will know, business expenses can easily add up and there is a range of credit cards to meet different needs. Some business credit cards are tied in with reward platforms while others are targeted for everyday transactions. Some business credit cards even come with insurance and no or low annual fees.
If this is something you want to learn more about, we recommend that you discuss this with your accountant to see if a business credit card is right for you.