These days, credit cards come with a lot of baggage that you have to really unpack in order to know what’s underneath. These range from reward schemes to travel insurance and of course, frequent flyer points.

Unfortunately, the market has also witnessed its fair share of trickery from the companies themselves, leading the federal government to propose reforms to help consumers and keep them from falling victim to all kinds of improper schemes.

To help you, we’ve listed down a few basics to let you pick the right card. Keep on reading!

The Basics

1. Credit cards with low interest rates often try to make it up with higher annual fees. However, paying an annual fee makes better financial sense than paying a high interest rate, especially if you only pay the minimum.

2. Rewards cards can be tricky, giving with one hand and taking with the other. They usually come with high annual fees that can easily cancel out the rewards unless you spend more and earn just as many rewards points.

3. Interest-free credit cards or balance transfer deals are tempting and can appear to be financially sound but remember that the interest-free offer is for a limited span of time only. If you still have an unpaid balance on your credit card after the offer ends, your interest would quite possibly skyrocket!

Credit Card Reward Schemes

Credit card reward systems are often a ploy unless you spend a lot, since rewards cards almost always charge massive annual fees and high interest rates. Credit card reward programs offer very little or next to nothing to consumers who don’t spend exorbitant amounts with their credit cards.

An investigation of 63 rewards credit cards uncovered that consumers would need to spend at least $2,000 each month to get yield any return, while those who spent $1,000 a month or less would actually end up paying more in annual fees than they got back in rewards.

Picking the Best Card If You Pay Your Balance on Time

  1. Annual fees: Take a closer look at cards with no annual fee and one that delivers a substantial number of interest-free days on purchases.
  2. Number of interest-free days: Try to have at least 14-25 days after the statement to settle your bill, giving you a maximum of 44-55 interest-free days on shopping.

Picking the Best Card If You May Not Pay on Time

  1. Consider moving your debt to a card with little to no interest rate for balance transfers. These cards can deliver some much-needed breathing space to get your finances back on its feet.
  2. If you do move your debts to a low-interest card, don’t use it for new transactions as they’ll just attract interest from day one. Dispose your old card if the temptation to keep spending cannot be ignored.
  3. Consider making use of a debit card instead. EFTPOS is a low-cost way to gain access to money from your bank account. And MasterCard and Visa Debit cards allows you transact online and overseas just like a credit card.

However, if your credit rating not up to par, don’t fret. There’s still hope. Start improving your credit rating with these tips.

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