What is a credit card tier system?

Premium cards

There are stricter conditions if you are applying for premium gold/platinum and black cards.

You will need a high level of annual income as well as an impeccable credit history to be approved for premium type cards. Applying for a premium credit card will open the doors to exclusive benefits including more reward points and complimentary extras. Premium cards are designed for people who spend a lot of money on plastic and have higher credit limits.

Beware, these types of cards often come with annual fees and higher interest rates than standard or regular cards.

Gold, black and platinum credit cards offer more perks and features than regular cards. These usually include higher credit limits, free insurance policies, rewards programs with better rates, better promotions, purchase protection and extended warranty policies.

Black credit cards are the most exclusive of these types of cards: with a black credit card you will receive superior perks and rewards.

Black credit cards offer a level of exclusivity that other cards do not possess. In order to be considered for a Black card you need to spend considerable amounts of money (in the tens of thousands of dollars) on the card throughout the year.

As stated, these perks do come at a cost so make sure to look at all annual fees and charges before deciding which premium credit card is right for you.

InfoChoice helps you compare over 60 platinum, black and gold credit cards.

Standard cards

Standard or regular credit cards are subject to credit checks, but are usually available to most people who require one.

These types of cards offer standard features and allow you to be approved for a predetermined amount of money.

Banks usually charge an annual fee for these cards.

These types of cards typically consist of low rate cards and balance transfer cards.

Low rate credit cards

Low rate credit cards are credit cards that offer interest rates that are lower than the average credit card.

These are the no frills option as they don’t offer benefits such as rewards programs or high credit limits, therefore are able to keep their rates low.

With these cards you save on interest costs.

Low rate credit cards are suitable for those who don’t or can’t pay off their credit card balance in full every month. These cards are also of benefit if you’re a student or new to paying with credit and want a cheaper credit card option.

Rates are quite competitive and usually range between 8.99% p.a and 14.99% p.a. You can also find many credit cards that offer 0% interest on purchases for an introductory period.

If you are in a bind and need to pay off credit card debt, you can move to a 0% balance transfer credit card which will offer you a no interest repayment period for a specified amount of time.

How to compare low interest rate credit cards

InfoChoice helps you compare over 151 low rate credit cards:

Here are some credit card features that can help you decide which one is best for you:

1. Promotional interest rates

Some Australian credit cards have a promotional period where they offer 0% interest rates on purchases for that specified period of time. This period depends on the card and varies between 6 and 15 months.

Always find out the interest rate your card will revert to when your interest free period is up. As any remaining debt will be subject to standard interest rate.

2. Standard interest rate

Standard rates on a low rate credit card usually start at 8.99% p.a and go up to around 14.99% p.a.

3. Balance transfer rates

Some low rate credit cards offer a 0% transfer balance for a period of anywhere from 6-26 months. With this type of card, you transfer your credit card debt over from your existing credit card and can concentrate on paying down your debt without having to worry about paying interest. However, make sure to pay it off before the promotional period is up. The 0% interest only applies to the amount you transferred, not to any new purchases you make on the new card.

4. Cash advance rates

Cash advances usually attract higher interest rates than is applied to purchases. The rate can be as high as 23% p.a and it applies to transactions such as ATM cash withdrawals, foreign currency purchases and gambling.

5. Interest-free days

Most credit cards also come with 44 or 55 days of interest-free days however you must pay your balance in full in the previous statement period.

How does a low rate card work?

It’s easy to reduce the interest you are charged each month by choosing a credit card with a low interest rate.

A low rate credit card works in a similar manner to a small personal loan. You are charged interest on the amount you have used for your purchase. However, unlike a personal loan, you can avoid paying any interest at all if you manage your finances properly and are able to pay off the outstanding debt in full each month. However, if you fail to pay the full amount at the end of the month, you will be charged interest on your remaining debt.

Advantages and disadvantages of low rate cards

Advantages

Lower your interest repayments

A low interest rate means lower monthly interest payments.

A low interest rate means lower monthly interest payments. Reduce your credit card debt

Transferring credit card debt to a low rate credit card can be help you manage your debt, especially if you opted for a 0% balance transfer.





Disadvantages

Fewer rewards

Low rate credit cards are considered the no frills card so there aren’t many rewards of perks with these cards.

Low rate credit cards are considered the no frills card so there aren’t many rewards of perks with these cards. Higher fees

These cards may be cheap in interest but the banks make up the money elsewhere, such as balance transfer fees or high annual fees

Balance transfer cards

Taking out a balance transfer credit card is a great way to help you get on top of your unpaid debt. By transferring your existing balance to a new credit card with a low or 0% introductory interest rate, it means your balance will be paid off faster. Balance transfer cards come with promotional periods that can last anywhere from 6-26 months. Just be careful to pay it off before the promotional period runs out as the interest rate will revert to the standard daily rate at that point.

InfoChoice compares over 68 balance transfer products:

How can I compare credit card balance transfer offers?

There are a vast array of products out there. Here are some features to compare:

Length of introductory offer. Many 0% balance transfer cards offer 6-26 month promotional periods. Low rate options don’t tend to go as long as 26 months. Make sure to select a card that will offer enough time to pay off your balance before having to revert to the standard interest rate.

Balance transfer fee. Not all banks charge a balance transfer fee, but those that do typically ranges from 1% to 3% of the total balance transfer amount. This fee is charged when your debt is transferred to the new card.

Balance transfer revert rate. Once your promotional period ends your interest rate will revert to the current interest rate. This is usually the standard cash advance or purchase rate.

Eligible debts you can transfer. You can usually transfer debt for a number of different credit cards and even from some personal loans.

Annual fee. There will usually be an annual fee on a balance transfer card. Some cards will have a $0 annual fee or may even waive this cost for the first year. However, when this fee is charged, it is treated as a purchase and attracts the same interest rate as other purchases made with the card. Paying the annual fee immediately, will mean you avoid interest charges.

Avoiding mistakes with balance transfers cards

Make the most of a 0% balance transfer credit card offer and avoid the following mistakes:

1. Thinking 0% interest means no payments are required

Minimum monthly repayments are still necessary for each statement period. This is usually stated as “3% of outstanding balance or $30, whichever is greater”, although the percentage and dollar amounts can vary between cards.

2. Only making the minimum repayment each month

Provided you make the minimum monthly repayments, you won’t be slapped with a late fee each month. However, paying only the minimum won’t mean you will pay off the entire debt before the promotional period is up. The best way to figure out what your minimum repayments should be (as opposed to the minimum bank requirements), simply take the figure of what you owe and divide it by the number of months you have left on your 0% period.

3. Making new purchases

The 0% interest only applies to the amount you transferred. Any purchases you make on the new card will attract interest immediately.

4. Keeping your old card open

Always close your old account as soon as the transfer has been made. It’s very easy to fall into the trap of using that card again and accumulating more debt.

No annual fee card

A no annual fee credit card is exactly what the name suggests. It’s a card that doesn’t charge an annual fee on an ongoing basis. In some cases it even waives the first year annual fee. The annual fee is usually the biggest of your fees and is one of the most common fees, so finding a credit card that doesn’t charge this fee could be worth your while.

InfoChoice can help you do this by over 24 no annual fee cards:

The annual fee usually covers you for yearly account maintenance. So, having a card with no annual fee could save you anywhere from $30 to $700, sometimes even more per year in comparison to credit cards that do charge the fee. Of course, signing up for this type of card comes with some disadvantages. If your credit card has no annual fee for the full term of your contract, you may be charged higher interest rates and have fewer perks than some other options.

There are a number of types of no annual fee credit cards.

Some no annual fee credit cards offer just the basics, while others offer a range of additional benefits.

$0 annual fee and 0% balance transfer credit cards are a great option for those who have accumulated credit card debt over time and are unable to get on top of their repayments. Saving money by not paying an annual fee or any interest on the balance for a specified period of time means you can pay down the debt quicker.

No annual fee frequent flyer credit cards are handy if you like to get frequent flyer points for your purchases. You need to shop around to find these types of cards, but if you are a frequent flyer point user, it may be worth your while to get one of these cards.

Reward credit cards with no annual fee are also hard to come by, but if you rely heavily on the rewards point system, why not get the extra benefit of not having to pay an annual fee?

Travel credit cards with no annual fees and no foreign transaction fees are great if you travel a lot or make online purchase overseas. Foreign currency transactions are usually accompanied by fees of around 2%-3%. Using a travel credit card with no annual fees and no foreign transaction fees could save you money as the foreign transaction fee isn’t charged.

Things to consider before applying for a no annual fee credit card

Before you decide if a no annual fee credit card is right for you, you may need to consider a few things.

1. How often do you use your credit card?

If you hardly use a credit card and only want it for emergency situations, not paying an annual fee is worth your while.

2. Do you pay off your balance each month?

If you sign up for a no annual fee card, you may be paying higher interest than other types of cards. So, if you are the type of person who is able to pay off the balance each month, this card will suit you. If you struggle to pay it each month, then the interest repayments will add to your bill making this type of card an unsuitable choice.

3. What credit card perks do you want?

No annual fee cards offer less benefits and perks than cards that charge a fee. You usually won’t get reward points or complimentary insurance with these cards. So, weigh up what you need before you apply.

4.Will you use the credit card after the $0 annual fee promotion ends?

Many promotional credit cards have a limited time for you to be able to take advantage of the product. So if your no annual fees promotion is only valid for a year or two, you should look into how much the fees will be once this time is up.

Advantages and disadvantages of $0 annual fee credit cards

Advantages

Save money on credit card fees. If you aren’t paying the fee, that’s money in your pocket.

Cost-effective if you don’t use credit cards a lot. If you only use these cards in emergencies, you are saving money by not paying an annual fee.

Promotional offers and deals. Some no annual fee credit cards come with promotional offers, frequent flyer programs and other features that you’d regularly have to pay a yearly fee to access.





Disadvantages

Higher interest rates. These cards usually have a higher interest rate. If you are the type of person to not pay off your balance each month, this could really affect your hip pocket.

Fewer extra features. They usually have fewer features than cards with a higher annual fee.

$0 annual fee is temporary. Most of these cards have a temporary $0 annual fee so you will need to pay an annual fee once the promotional period ends. Make sure you know when the standard annual fee will apply and how much it will cost you.

Frequent Flyer Credit Cards

Frequent flyer credit cards give card holders a way to earn points on their everyday spending – provided it is eligible. They also offer introductory bonus point offers. These cards are usually linked to an airline loyalty program. You can also get thousands of frequent flyer points in introductory offers. You will be able to earn points on most purchases, however you will not earn points for cash advances, balance transfers and BPAY payments. Once the points are redeemed, you can use them towards flights, flight upgrades and even accommodation.

Are there any traps with a frequent flyer credit card?

Frequent flyer credit cards come with many perks but you must always keep your eyes open for the hidden traps.

1. High annual fees. Most frequent flyer credit cards come with an annual fee in the range of $50 and $450. If you aren’t earning a decent amount of points throughout the year, it may not be worth your while to have one of these cards. There are some $0 annual fee frequent flyer cards available, but these don’t usually have the best rates or features attached to them.

2. Promotional offers and spend requirements. To take advantage of bonus points offers you usually need to spend a certain amount of money in a set period of time. Always make sure that this fits in with your budget.

3. Higher interest rates. Frequent flyer credit cards usually have high interest rates. So they are suited best to people who are able to off their credit card balance in full each month.

How many points can I earn for my spending?

There are two main factors to consider when it comes to earning points with a frequent flyer credit card:

Earn rate. Always find out how many points you earn for each dollar spent. 1 point per $1 is considered competitive, but some can be as low as 0.5 whilst others are higher.

Points tiers and caps. These cards have a tier system and depending on the card, the number of points may vary depending on the purchase. Some cards also cap the number of points you can earn once you reach a certain amount each statement period.

What types of features can Frequent Flyer cards offer?

Most of the features you can redeem range from complimentary flight vouchers or travel credits to airline lounge passes, complimentary travel insurance and concierge services.

How can I get approved for a Frequent Flyer Credit Card?

You need to determine whether or not you meet the eligibility requirements to receive approval for a frequent flyer credit card. As with most credit cards, they will request things like proof of income, Australian residency status and credit history details. As these cards are considered premium products, you may need a higher income in order to be approved. Once you have all your documents in order, the bank will assess your details and documents to determine if you’ll be approved or not.

Business Credit Cards

Business credit cards are designed for work-related spending and cash flow and are useful in keeping your business and personal spending separate. Business cards come with the additional benefit of being able to issue a card to employees. They provide you with itemised statements and are compatible with services such as MYOB, Xero and Microsoft Excel.

Business credit cards work in a similar way to personal credit cards. You have access to a predetermined limit and you pay towards your balance plus interest each month. Business cards usually charge an annual fee, sometimes this is for the entire account and other times it is per card. They also offer features such as rewards, complimentary insurance and airport lounge passes.

With expense tracking features, additional cards, interest free periods and reward options, business credit cards can be a convenient option for your business no matter how small or large it is.

What to look for when comparing Business Credit cards

Compare business cards to see which one offers the features you need for your business.

InfoChoice helps you compare over 20 Business Credit Card products:

Some of the things you should look at when considering a Business Credit Card are:

1. Business spending habits

Determine what your business spending habits are so you can make an informed decision on which product is right for you. To determine what your habits are, look at your eligible purchases, capital expenses, additional cardholder spending and business travel needs.

2. Fees

Business credit cards have a wide range of fees and charges, such as establishment fees, annual fees, supplementary cardholder fees, standard interest rates, over limit fees however along with these fees come a variety of benefits such as business rewards, complimentary insurance, expense management systems just to name a few.

3. Advantages and disadvantages of Business Credit Cards

Benefits

Tax deductions

Security features

Customisable credit limits

Additional cardholders

Cash flow management

Liability options

Complimentary extras specifically for businesses





Disadvantages

Expensive fees

Interest charged if you don’t pay your balance in full every month

Account can only be used for business spending

How to apply for a business Credit Card

Once you have done your research and found the product that is right for your business, you can apply online. You will need to meet the following eligibility requirements and have all relevant documentation at the ready:

Eligibility requirements

You must be 18 years or over

You’ll need to be a citizen or permanent resident of Australia.

You must have a valid ABN (Australian Business Number) to apply and be registered for GST if necessary

You must have good credit history





Documentation

Contact details for you and/or your business

A valid form of identification, such as your driver’s licence or passport

All financial documentation will be required as well as tax returns from the past 2 years Information regarding your income and/or revenue. Also a list of any assets and liabilities, debts and expenses

Details for additional card holders

Once you have sent everything in, approval usually comes with in a matter of minutes. If you’re approved, you could have your card in as few as 5–10 business days. You can then activate the card and start using it for your business.

Rewards credit cards

Rewards credit cards are linked to a loyalty program where earn points for every dollar you spend on eligible purchases. These points can be used for rewards such as flights, merchandise, accommodation, travel packages, gift cards, cash back and products from the rewards store.

InfoChoice compares over 68 cash back and rewards cards:

Reward credit cards usually charge higher interest and annual fees so make sure the benefits of the points outweigh the amount you are paying in interest and fees.

Eligible purchases are generally your everyday purchases like grocery shopping and online shopping. Transactions that don’t usually get credited with reward points are BPAY transactions, cash advances and account fees.

What types of rewards can I get?

Each rewards card offers different types of rewards, however generally you can find the following: flights and flight upgrades, frequent flyer points, accommodation, gift cards, fuel vouchers, electronics and even tickets to theme parks and movies.

How do I redeem my points?

Each credit card has a different process, but in general terms it’s as easy as following these few steps:

Log in to your account and find the rewards tab;

Check how many points you have. If you have enough points to make your selection, then go ahead. If not, you can either wait until you have earned more points or you can pay the dollar difference from your account to make up for the extra points;

Once you are ready to proceed, click ‘Redeem points’ and follow the prompts to complete your transaction.

How to compare rewards credit cards in Australia

The best way to figure out which rewards card is for you, is to search online and see the different ways you can earn your points.

How can I earn points?

Bonus point offers. Rewards credit cards offer deals that give you thousands of bonus points. This is a great way to get you started.

Points per dollar. Find a card that gives you at least $1 per 1 point. The higher the better, any lower than that is not considered very competitive.

Point expiry. Some cards have an expiration date on points or a cap on how many you can earn per month.

What costs are involved in having a Rewards Card?

Annual fees. Most rewards credit cards charge an annual fee. The rewards you redeem with your points should exceed the annual fee if you are to benefit from this card.

Foreign transaction fees. Foreign transaction fees of around 2%-3% are common on most credit cards and apply to purchases made overseas or with an international retailer online.

Purchase interest rates. Rewards credit cards often have high standard interest rates on purchases. If you are able to pay off your balance in full every month then this shouldn’t be a problem for you, but if you are unable to make those payments, then you may be better off ditching the points and finding a card with lower interest rates.

Cash advance interest rates. You will not receive any points for cash advances and you will also have to pay interest on that withdrawal.

Complimentary features with Rewards cards

Rewards cards come with a decent number of features that you won’t get with a standard credit card. Some of these features include: complimentary travel insurance, flight and travel credits, hotel stays and discounts, extended warranties and concierge services.

Rewards programs can be a great way to get extra value from your credit card, as long as the rewards are worth more than what you spend on fees and charges.