11th September, 2017 | 4 minutes
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What you need to know before getting a credit card

by Andrew Miller
Finance Geek

On television and the big screen, credit cards are often portrayed as a consequence-free solution to our financial woes. In the real world, it’s not quite that simple.

There are interest rates, expiry dates, reward programs and minimum payment requirements – all vital considerations to ensure you get the most from your credit card and avoid being overrun by debt.

We provide the lowdown on the risks and rewards to help you decide whether a credit card is the right financial decision for you.

Why get a credit card?

This is the first question you should ask before jumping into a major decision. After all, a credit card isn’t for everyone. Below are just a few of the advantages:

  • Convenience: Make payments when you’re short on cash.
  • Cash flow: Purchase what you need without waiting until payday.
  • Reward perks: Earn rewards, such as loyalty points, based on your spending.
  • Safety: Your card can be cancelled quickly if lost or stolen.
  • Travelling: Purchases can be made in any currency (conversion fees may apply).
  • Financial security: Cover large, unexpected costs between paychecks.
  • Interest-free days: Pay credit bills within the ‘grace period’ and avoid paying any interest money borrowed.
  • Repaying debt: Consolidate existing debt and move to a new account with low or no interest rates to pay it off sooner.

What you need to know before getting a credit card

Always be aware of the risks

As with any debt, using a credit card comes with a degree of inherent risks. As long as you , however, you won’t spend beyond your means. Here are some common credit card risks to monitor:

  • Interest rates: If you’re unable to pay your credit card bill within the allocated ‘free days’ – also known as the grace period – you’ll incur a percentage of this debt as interest on top of what you already borrowed.
  • Credit rating: Owning a credit card can improve your credit rating – your ability to pay back any debt on time – but missed payments can impact your chances of securing a loan in the future.
  • Withdrawing cash: Certain credit cards charge a percentage fee for the amount of cash withdrawn.
  • Annual fees: If you can’t justify paying your credit card’s annual fees based on how often you use it and the reward points you earn, then you might want to consider finding a card with lower annual fees.
  • Surcharges: You’ll often be charged a percentage fee when using a credit card to purchase goods or services from a business.
  • Overspending:Credit cards make it easy to spend as much as you want (up to a set limit) without thinking about it. Remember, you’ll have to pay back everything you borrow eventually.

Consider the rewards

If you’ve weighed up the pros and cons and decided a credit card will benefit your spending style and financial situation, it’s time to choose which card offers the most benefits.

Reward programs, for example, offer loyalty points based on how much you spend. These points can then be exchanged for various rewards, such as purchasing products or receiving cashback.

When comparing credit card reward programs, consider the rewards you actually want and whether or not they’re worth the fees associated with the card. Finding this balance will capitalise on your spending style and provide true value for money.

Make a smarter choice with iSelect

If you’re struggling to choose a credit card, iSelect’s comparison tool can help take the stress and confusion out of your search. Simply tell us what you’re hoping to get out of a credit card and we’ll provide you with a list of options to compare.

Tell us what you’re looking for and we’ll make it easy to compare cards

Compare credit cards

iSelect does not compare all products in the market. Not all products are available at all times. iSelect does not compare all products in the market. Not all products are available at all times. Any advice provided in this content is of a general nature and does not take into account your objectives, financial situation or needs. You need to consider the appropriateness of any information or general advice we give you, having regard to your personal situation, before acting on our advice or purchasing any product.


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