Finder’s free service makes comparing credit cards simple. Someone new to the world of credit cards may find the varieties offered in the market mind-boggling. Here’s a comprehensive guide from Finder to help you navigate your choices and understand the features and fees that come with this convenient source of credit.
Compare New Zealand credit cards for 2019*
* The credit card offers compared on this page are chosen from a range of credit cards finder has access to and are not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of the terms “best” and “top” are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.
A credit card is an unsecured revolving line of credit, which basically means you can borrow money to make purchases without having to put up collateral (upfront cash). Based on your perceived ability to make repayments, credit card companies assign a credit limit, which is the maximum amount of money you can borrow.
Unlike a debit card that uses your own money to make purchases, when you use a credit card, it is the lender who pays the retailer. At the end of your billing cycle, you receive a statement and that tells you the total amount you owe the lender for that period. Credit card companies make money on fees and the interest that accrues on your revolving credit.
There are many types of credit cards depending on the type of user. They range from general purpose cards issued by big banks, to brand-specific rewards cards.
Credit card companies have been offering increasingly shiny rewards, signup bonuses, and travel perks to lure new users to spend with them. This can be very helpful if you pay your bills on time and in full. If you don’t you might offset any rewards gained by paying more in fees and interest.
How credit card interest works
As you spend on your credit card, your debts will also begin to collect interest if you’re unable to pay the whole balance back by the end of the statement or interest-free period.
A card might have different interest rates for different uses.
If you’ve used your card for purchases, it will start collecting interest charges at the “purchase rate.” If you’ve used your card for an ATM withdrawal or any other transaction that’s considered a cash advance, you’ll accrue the “cash advance rate” which can be higher.
If you decide to transfer your debt from one card to another you’ll also accrue a “balance transfer interest rate”, which is usually the same as either the interest rate or cash advance rate. However, some cards do offer 0% promotional periods on purchases and balance transfers, so this is something to keep in mind during your comparison.
Each month, you’ll receive a statement that will detail the transactions you’ve made, the total outstanding balance you have and any interest you’re accruing. While you’re only required to pay a minimum repayment each month it’s best to pay as much as you can. If you pay your entire balance in full, you can usually take advantage of up to 55 interest-free days in the next statement period. If you don’t pay your entire balance in full, the remainder will start to collect interest. If you miss the minimum repayment, you could be charged late payment fees.
Manage your debt. The longer the low or 0% balance transfer APR lasts, the more you can save.
Beware of the revert rate. When the introductory low or 0% interest rate ends, you could find yourself confronted with a much higher interest rate.
What is the balance transfer offer? There are a few ways to compare how competitive an offer is. The introductory rate you’ll be charged on a balance transfer card is usually low or 0%, so this is something you’ll want to consider. The length of the balance transfer period also differs, though it generally falls between six and 24 months. You’ll want to choose a balance transfer offer that will allow you to pay off your debt before the offer ends.
What’s the revert rate? If you don’t think you can repay your existing debt within the promotional period, consider whether the revert rate will attract more interest and how this will impact the savings you’ve made.
How much can I transfer? Many providers set limits on the percentage of the credit limit you can transfer. If your existing balance exceeds the limit, you may want to consider a card with a higher credit limit.
The major draw of this type of card is earning points that can be redeemed for rewards. Depending on the card you use and the promotions in place, you may be able to earn bonus points when making certain types of purchases or shopping with a particular retailer.
What you can redeem your points for will vary from card to card. Some allow you to redeem points for flight rewards as well as shopping or travel vouchers. Others can be used for cash back, to redeem merchandise or even to donate to charity.
What are the associated costs? Typically the higher the rewards the higher the card costs, so be careful. While some rewards cards charge no ongoing annual fees, others charge higher annual fees in the hundreds of dollars. The more features the card has, the higher the fee is likely to be.
Are there limitations? Your card provider might not let you earn more than a given number of points in a calendar year, and your points can also expire after a set time frame.
What are the other perks? Many rewards cards also offer extra perks, such as complimentary travel insurance. Compare your options to see which features work best with your lifestyle and spending habits.
0% APR credit cards allow cardholders to take their time when paying off larger purchases or consolidating existing debt.
If the 0% APR is only in place for an introductory period, the revert rate could be significantly higher. These cards often require applicants to have a good credit history as well.
How long is the 0% APR? Carefully confirm how long the 0% offer lasts. If you do not repay your balance by the end of the promotional period, you may find that your existing debt attracts a much higher APR.
Are there other fees? If there’s an annual fee, make sure that the savings you’ll make in interest and other benefits of the card will offset the annual fee.
What are the other perks? Is there a rewards program, or can you earn bonus interest-free days if you pay your balance in full each month? Extra features like these can help you determine the true value of the card.
If you struggle to repay your balance each month, low interest cards can help you reduce the costs of your card.
The advantage of low interest usually comes at the cost of forfeiting the extra features that a premium or platinum card may offer, such as a rewards program, complimentary rental car insurance or other perks.
How long is the low APR period? Sometimes the low interest will only be in place for an introductory period (say, six to 12 months), whereas other cards may offer the low rates for the lifetime of the card. If it is the former, make sure to check the revert rate to avoid any nasty surprises when the promotional period ends.
What are the other fees involved? Depending on the card, the low rates may be balanced out by higher fees. Read the terms and conditions of the card to ensure that the overall costs, such as the annual fee, don’t outweigh the low interest.
Cards with no annual fee
A no annual fee card doesn’t charge a yearly fee. Some cards have this as an ongoing deal; others will waive the standard fee for the first year of using the card.
Not having to pay an annual fee can result in savings each year.
If the annual fee is only in place for a promotional period, there may be a high annual fee when it reverts to the standard rate.
How long is the no annual fee offer in place? You’ll need to confirm whether the no annual fee is in place for the lifetime of the card or only for a promotional period. If it’s the latter, you’ll want to check how long the promotional period lasts and what the annual fee will revert to at the end of the introductory period.
What other fees and rates are involved? Just because there’s no annual fee doesn’t mean there won’t be other fees associated with the card. For example, if the card comes with a higher interest rate or a lower rewards rate, you may find that these overshadow the savings you’ve made on the annual fee. Calculate these figures before applying to make sure the card works for you.
What perks are on offer? Cards with no annual fee often lack additional perks such as high-earning rewards programs or concierge services. If these extra benefits are of value to you, you may want to reconsider what’s on offer.
Repayments. You’re required to make the minimum repayment when your statement is issued. The minimum repayment is usually 2% of your outstanding balance. You will pay a late payment fee if you don’t make the minimum repayment by the statement due date.
Annual fee. This is the cost to own a credit card. The annual fee ranges from $0 to hundreds of dollars depending on the credit card type.
Interest rates. Interest is the price you pay to borrow money. Credit card interest rates are much higher than other types of finance because credit cards are an unsecured product; financial institutions have no recourse to take your assets if you default on your repayments.
Other fees. Other fees you may run into include late payment fees, rewards program membership fees and cash advance fees.
Assess your needs. Before you begin your search, spend some time considering what you want, need and can afford with your next credit card.
Compare your options. Once you’ve decided what type of card you want, it’s time to begin comparing your options.
Are you eligible? Know the requirements for the card application – do you need a minimum income, and do you meet the age limit?
Know your credit history. It can be a good idea to request a free copy of your credit report before applying, so you can correct any possible errors on it and see what the bank will be seeing when they assess your application.
Lower your credit utilization ratio. If you already have a credit card balance, it’s wise to pay off your existing balances before submitting a new credit card application.
Don’t apply for multiple cards at once or within a short period. You may be tempted to apply for a second card just in case your first one doesn’t get approved, but don’t. Each credit enquiry that a lender makes about your credit history leaves a new mark on your credit file for five years.
Sally McMullen is Finder's credit cards and frequent flyer editor by day and a music maven by night. She's also one half of the Pocket Money podcast. Her byline can be spotted on Yahoo Finance, Dynamic Business, Financy and Mamamia as well as Music Feeds and Rolling Stone. Sally has a first-class Honours degree in Communications and Media Studies (majoring in Journalism and Professional Writing) from the University of Wollongong.
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