5 Things To Know Before Getting Your First Credit Card
A credit card may appear like just another tool to make purchases, but it can be so much more! Are you ready for your first card? Let us be your guide…
1. What’s the difference between a debit card and a credit card?
First of all, a credit card is not a debit card. Instead of having funds removed from your account when you purchase something, a credit card is essentially the same as taking out a short-term loan.
Much like a loan, a credit card carries interest, which can be avoided if you pay your credit card bill in full before the end of the billing cycle.
In summary: even though they look almost-identical, a credit card doesn’t take money directly from your checking account like a debit card does.
2. Why should you get a credit card?
A credit card – used sensibly – can help you built your credit score. Good credit can lead to a multitude of benefits – favourable loan and mortgage rates, approval on an apartment or mobile contract, along with loads of other benefits. But, be patient – building a great credit score takes time.
Some credit cards also provide you with cash back rewards, with many offering sign-up bonuses worth hundreds of dollars.
For instance, the American Express Essential allows you to earn one membership reward point for every $1 spent, along with Smartphone Screen Insurance of up to $500. Similarly, the David Jones American Express Platinum offers four reward points per $1 spent at David Jones.
In summary: a credit card can help build your credit score (when used wisely), and offer some pretty impressive rewards!
3. What types of credit cards are there?
Low Interest Credit Card – If you know you won’t be able to pay off your monthly credit card bill in full then a low interest credit card could be right for you!
Balance transfer credit cards – If your credit card debt is, let’s say, a bit ‘out of control’ and you’re being charged a high interest rate then it's recommended you move over to a balance transfer credit card. You simply move your existing credit card debt across to a new balance transfer credit card and pay low or no interest on your transferred debt for a period of 3-24 months. Simple!
No annual fee credit card – A card with no annual fee is simply a... card with no annual fee! If you are planning to use your card only a few times a year and pay your balance off in full each month, then a no annual fee card is for you.
Rewards credit card – This card allows you to accumulate points every time you make a purchase. These points can be used to buy things like petrol, vouchers, electronics and frequent flyer points.
Frequent flyer credit card – If you enjoy the idea of converting your dollars into flights, a frequent flyer credit card is worth considering. If you fly often, this card will propel you towards higher membership tiers of your frequent flyer program, which means you can save on flights, gain access to flight upgrades or premium airport lounges, and complimentary travel insurance.
Platinum and black credit card – These high-end cards are available to those over 18 who earn over $50,000 per annum, and have a faultless credit rating. However, the annual feeds for these can be very high, with quite hefty interest rates.
4. What are the different types of fees?
Annual Fees – These are often charged on some rewards cards, but can be avoided by getting a card without an annual fee.
Foreign transaction fee – You will typically get charged when purchasing products from overseas. However, you can avoid this fee by getting a credit card without foreign transaction fees.
Late payment fee – This means you are charged a late fee if you don’t pay at least the minimum payment by the due date.
Purchase rate – This refers to the interest rate applied to purchases made with a credit card. However, it only applies to balances that aren’t paid in full by the end of the billing cycle.
5. Where can you compare credit cards?
Savvy offers a valuable service where you can compare many credit cards on the market. Whether you’re looking for a platinum, low rate, balance transfer, rewards, no annual fee or frequent flyer credit card, Savvy compares them all in an easy to understand format, and even allows you to apply for one.
What more could you want? Get shopping!
Click here to learn more about what Savvy offers.