Preparing to apply for a credit card can be a daunting experience. It’s natural to feel a little overwhelmed with all the options available. It’s important to take your time in choosing the right credit card for your needs so that you don’t end up getting a card that you cannot afford to pay back, and so that you are getting the rewards that align with your lifestyle and financial goals.
What is a Credit Card?
A credit card gives you access to borrowed money up to an agreed limit, that you must pay back at a later date. Credit cards work differently to personal loans in that they provide you revolving credit – which means the borrowed funds are ongoing. This money can be used to buy goods and services in store and online, and even overseas. Because you are borrowing money when using a credit card, you will be charged interest, which is typically applied to the amount borrowed when you don’t pay off the balance in full each month.
Things to Consider When Choosing a Credit Card
What type of credit card do you want?
The type of credit card will depend on what you want to use it for, your lifestyle, and the things you want to get out of it. Generally, there are three types of credit cards.
Low Interest/ No Fees: This credit card is a great option for someone who wants to build up their credit score, and who will pay off their credit balance each month.
Airpoints Card: Most NZ banks offer an airpoints credit card that allows you to earn Airpoints dollars. This is a great option for those who wish to use their credit card for travel.
Cash-Back Card: These credit cards reward you with cash and vouchers that you can use for everyday expenses. Great for those seeking flexibility with their rewards.
What credit card limit do you want?
Generally, credit cards will have a minimum and maximum limit and it will differ from card to card. It’s important to know how much you can reasonably afford to spend and again, what you will be using the card for. Consider whether you will be using it for all your expenses or just large purchases and emergencies.
Annual Fees
There are a variety of credit cards on the market and therefore, a range of annual fees. This is a fee that will be charged every year by your credit card provider. Generally, if the annual fee is higher, you will get access to more perks and benefits.
Interest Rates
If you can pay off the credit balance on your card before your interest accrues, that would be ideal. But if you carry over the credit, you’ll want to have a good interest rate. It is important to compare the interest rates of different credit cards and banks to see which offering will work best for you and your available income after expenses.
Other Perks and Benefits
Some credit cards will offer travel insurance, airport lounge access, rewards on groceries and petrol. It’s important to compare the different credit card perks and benefits, in relation to the costs, and consider what value you might get out of it.
Compare Credit Cards
It is important to take the time to compare credit cards before you go ahead and apply for one. Comparing can ensure you get the best deal for your needs, and make the most informed decision. Here at Money Compare, we are all about helping Kiwis make better decisions with their hard-earned money and enjoy savings. Jump on Money Compare to compare different credit cards to make sure you choose one that matches your needs and goals!
