The how to guide when choosing a credit card

When it comes to choosing a credit card, the choice isn't always easy!

With many credit card offers from New Zealand banks, it does help to do some research to ensure you understand them, and more importantly can compare them to find a credit card offer that suits your spending habits and financial situation.

There is no denying credit cards have their uses. In fact, many people don’t even carry cash when they have a credit card in their wallet. Herein lies the danger, as it is too easy to pay for everything with your credit card. It is important to learn the essential points about choosing a credit card and completing an online credit card application.

Compare credit cards for November 2019

Updated November 14th, 2019
Name Product Purchase rate (p.a.) Annual fee Minimum Income
$1,250 p.a.
A charge card with premium travel benefits and up to 80,000 Membership Rewards Bonus Points when you spend on your card within the first 3 months.
2.99% for 6 months (reverts to 19.95% APR)
$149 p.a.
Enjoy a low rate on purchases and earn 20,000 Membership Rewards Bonus Points if you apply, are approved and spend $750 in the first 3 months of Card membership.
19.95% APR
$195 p.a.
Receive 200 bonus Airpoints Dollars when you apply, are approved and spend a minimum of $1,500 in the first 3 months. You will also earn 1 Airpoints Dollar for every $59 you spend on your card.
0% for 6 months (reverts to 19.95% APR)
$0 p.a.

Be rewarded with 50 bonus Airpoints Dollars. Simply apply, be approved, and spend $750 on your new Card in the first 3 months of membership.

Compare up to 4 providers

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Other credit options to consider before choosing a credit card

Personal loans vs credit cards

Personal loans usually have a lower interest rate than a credit card. When you borrow money, the credit provider charges you interest on the loan until the debt is repaid. A personal loan has fixed term payments and a lower interest rate, so the debt tends to reduce faster than that of a credit card.

By comparison, credit cards don’t have a fixed timeframe for payment, ie you can make a minimum repayment each month, and still keep adding credit to your card until your limit is reached. This is not a good way to reduce debt, which is another thing to think about when picking a credit card.

Interest-free shopping

It’s not unusual, in New Zealand to see major electrical and furniture retailers advertising, “Nothing to pay for six months, or until 2019”. These offers are usually for big-ticket items such as washing machines, entertainment packages or plasma TV’s etc. Buying an item interest-free lets you take a purchase home, and pay it off during the given timeframe, or before the interest-free period expires.

If you opt for interest-free shopping , it is nice to have the item immediately, but you need to consider how will you cope financially two years later when you are still paying for the item.

Picking a credit card

After considering your options and deciding you want to choose a credit card, there are a few steps you can take to ensure you select a card that is right for you as this is critical and depends on the following aspects:

  • Interest Rate
    First and foremost, consider the interest rate. Often, credit cards say they have a 0% APR. This means there is no interest. That’s fantastic, except for one small detail, it is probably just the introductory rate. and is only for a short period before it increases to the purchase rate. If you have a high outstanding balance on your card, see if you can find a one that offers a 0% transfer rate, so you can move the balance from a high-interest credit card over to this no-interest card. This may be a saving grace for your pocket and debt, but remember, the 0% APR on the balance transfer is an introductory rate. Make sure you pay back the balance during the 0% interest period, because the interest rate will revert to a higher percentage when the period ends.
  • Rewards
    If you are like most people and want to receive an additional benefit for using a credit card, look into getting a rewards card. Credit card companies provide different incentives in the form of rewards. These can be anything from airmiles, gift cards to hotel accommodation. The credit card company decides which reward incentive to offer, and reward you with points for every dollar you spend.

However, make sure you check out the annual fee. If you don’t use the card regularly then paying an annual fee may cost you more than you receive in rewards. A rewards card is ideal for the person that uses their credit card a lot and pays back the balance before the end of the month, as this is the way to reap the benefits. Finally, check the fine print as to when the rewards become invalid, as they aren’t yours forever and you have to use them within a certain period. Look out for cards that offer “no point expiry”, as a feature as it drastically increases the value of a rewards card.

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How do you know what sort of spender you are or how to select a credit card that’s right for you?

Generally, there are two categories of spenders:

  • The debtor who uses their credit card frequently, without paying off the balance. Debtors leave themselves open to paying interest on purchases and acquire an ever-increasing debt balance.
  • The transactor, who also uses their card often, but pays the balance in full each month to avoid any interest charge.

Select a credit card that matches your type of spending

Because debtors and transactors spend differently, they need to look at how to pick a credit card, and their various offers, from a different perspective. A person who pays their card each month is usually disciplined and doesn’t spend more than they can afford. Consequently, a credit card with low fees and a reasonably good interest-free period is appropriate for this category of spender.

Providing the balance is always paid before the due date, interest is not applied. However, it can be a costly mistake if you miscalculate due dates or overlook a payment. Not only are you charged interest, but you stand the risk of losing the interest-free privileges and being charged from the date you made the purchase.

Another point to bear in mind is that interest-free days do not apply to cash advances. When you use your credit card to withdraw cash from an ATM or bank, it is deemed a cash withdrawal.

How to select a credit card if you don’t pay off the balance each month?

If you carry your balance over each month, select a credit card with a low yearly % rate. This is important, as you continually have interest charged on the outstanding debt.

There is no benefit to you in picking a credit card with an interest-free period, as you can’t take any advantage of it. When you don’t pay your balance in full, you are charged interest from the date of the purchase, until the balance is cleared. The right type of card for you is a low-interest, no-frills credit card.

What is the benefit of rewards programmes?

Rewards programmes are attached to cards where you are offered an additional bonus as an incentive for using the card. They are usually intended for regular card users, and the benefits are varied. The principle is, the more you use your card, the more rewards you earn. The user that benefits most from a rewards card is the one that pays their balance in full each month, as these cards tend to have high interest rates and fees.

If you don’t pay your balance in full every month, the benefits are outweighed by the annual fees and high interest, which exceed the perceived benefit of the reward.

If a rewards card appeals to you, make sure you understand what is involved before you apply:

  • Does it cost more to join a rewards programme?
  • What reward is being offered?
  • How much has to be spent to receive the reward?
  • Do you normally spend that amount?
  • Do the rewards points have an expiry date?

It’s a good idea to find out how many points you earn per $1 spend, plus how many you need to accumulate before you can use them to obtain goods or services. Also, find out if you have to pay loyalty points as an additional fee when you want to exchange them for flights or other rewards.

What does choosing a credit card really come down to?

In the end, you need to pick the credit card that suits you the most. Bad at paying back your balance? Get a low-interest credit card,but remember that the 0% APR is not forever. Good at paying back your balance and want to earn rewards in the process? Go with a higher interest card, but one that offers a rewards programme. It’s up to you, but pick the one you believe will fit your personal spending habits and financial lifestyle.

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How to choose a credit card provider

The New Zealand market offers a range of credit cards and lenders. Although it is important to look at the interest rate and deals offered, it is also important to know how to select a credit card provider. The factors you should take into account are:

  • Availability. If you are a frequent card user, it is possible you will contact your provider on a regular basis, so make sure they are easy to reach. Is there a local branch you can visit if you have a dispute, want to make payments, or collect a new card? Do they have good online facilities, to access your account and manage transactions?
  • ATMs. Are there plenty of available ATMs for you to use? If you use an alternate ATM (not associated with your credit card provider) you may incur an additional charge for each use. Are the ATMs convenient to your home or workplace?
  • Customer service. You may want to choose one of the major New Zealand providers ie ANZ, BNZ, ASB or Westpac for an extra sense of security. However, being part of a large corporation can mean a loss of the personalised customer service you may get from a smaller financial institution. You need to decide which is more important.Are you prepared to sacrifice a lower interest rate for personalised service?
  • Fees and charges. When selecting your credit provider don’t just look at the interest rate, check out what other charges and fees are levied on your card. After looking at the fee structure, you need to be certain you are getting value for your money and the fees are not excessive.
  • Rewards. Does the credit provider offer a good rewards programme? If you pay your balance in full each month, this type of rewards card may be beneficial to you.
  • Extra card benefits. Credit card lenders can offer extra benefits on their cards, including:
    • Discounted goods and services
    • Insurances and payment protection

There are many providers to choose from and all are eager for your business, so it is worth taking your time to examine what they have to offer. Nowadays, rather than trail from bank to bank, people tend to do their research online. You might feel loyalty to the bank where you already have an account, but it is in your best interest to shop around.

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Comparing interest rates and fees

When choosing a credit card it’s essential to compare the different interest rates and fees that are charged. This is where you need to take into account your specific spending habits.

Understand the interest rate variations

Unfortunately, it can get complicated trying to navigate the various interest rates and how they are applied. Different rates can apply in different situations, depending how your card is used and the frequency with which payments are made. The following examples will all have a different rate applied.

  • Purchasing goods or services
  • Making a cash withdrawal
  • Transferring the balance of your credit card debt to another card

Balance transfer offers

Balance transfer offers are often made for an introductory period to gain new customers. They are not offered to existing customers. The offer usually takes the form of transferring the balance of your existing credit card to the new account, with a zero or low balance for a predetermined period. Once the period expires, you revert to paying the normal interest rate for that account.

However, there are a couple of things to take into account, the zero or low-interest offer only applies to the balance you are transferring. Any subsequent purchases or cash withdrawals attract the normal interest rate. Also, check whether there are any transfer or administration fees, as they could outweigh the benefits you are gain with the low-interest rate.

Credit card fees

There is a range of fees and charges that can apply to credit cards. When selecting a credit card, make sure you read the policy terms carefully, so you know exactly what fees apply, and how they are applied. The most common fees are:

  • Annual fees
  • Late payment fees
  • Balance transfer fees
  • Cash withdrawal fees
  • Exceeding credit limit fees

Terms and conditions

What information do I need to know when picking a credit card?

Credit lenders are required by law in New Zealand, to provide you with all the details of a credit contract before you enter into the agreement and choose a card.

By using the credit card, you are considered to have accepted the contract with its subsequent terms and conditions. Before entering into the contract, you must be advised of the following:

  • Maximum limit of the credit card.
  • The yearly interest rate and how it is applied.
  • How the interest is calculated.
  • Minimum monthly payment required.
  • All fees and charges, and when they are payable.
  • If the interest, fees or charges are variable, how will the credit provider notify you of changes?
  • If you breach the terms of the contract, you may be liable for any recovery costs.
  • Details of optional insurance, such as loan protection, that you have agreed to.

Credit card checklist

A low-interest rate credit card is designed for anyone who wants to finance their purchases over a few months as they know the interest payments are kept to a minimum. An introductory offer that lowers the purchase interest rate for the first few months is even better, as long as the revert-to rate is also one of the lowest.

A balance transfer credit card will suit your needs if you have debt on a card from another provider and want to reduce the interest charges for a set period, by switching to a new provider with an introductory offer.

A zero annual fee credit card is an option if you only intend to use your card for occasional spending and you pay it off in full at the end of every month. In this case, the higher interest rates on these cards is not an issue and you effectively have a no-cost credit card.

A rewards credit card is great for anyone who naturally puts a lot of spending on their credit card and feels they might as well take advantage of it and build up points to redeem for rewards, eg flights, cashback, merchandise or gift cards.

With credit card comparison websites full of the pertinent information, there is far less chance of you ending up with the wrong credit card. Provided you correctly analyse your credit card needs before visiting these sites, you should be able to find a credit card to suit your requirements.

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What is a credit limit?

The maximum amount that can be charged to your credit card is known as the credit limit. This amount is determined by your credit card provider, and is based on information you supplied in your application.

It can be tempting when you first get a new credit card to go on a wild shopping spree, but you need to exert some restraint or you will find it costly at a later date. If you have been given a high limit, and you think you might be tempted to spend it, ask your provider to reduce it and you can then apply to have it increased at a later date if necessary.

Don’t forget it is a credit lenders job to make money from your business. Only take on a credit limit you know you can comfortably repay.

Minimum payments

When you only make the minimum repayment each month, rather than paying the balance in full, you are subject to interest being applied to your account. Obviously, it takes longer to pay off your credit card if you only make small payments. Many people do not bother to work out exactly what they pay back when the interest included.

For example, if the balance on your credit card each month is approximately $2,800, and you made the minimum payment of 2% of the debt each month, it could take up to 50 years to pay back the total debt on your credit card.

If the credit card comes with a yearly interest rate of 18%, you will pay at least $25,000 in interest to your credit card company, over the years. Think carefully about how much you can afford to pay back each month and come up with a budget to keep interest you pay to a minimum.

Increases in credit limits

When you have had a credit card for a while and made regular payments, your provider may offer a periodic credit limit increase. Consider these offers cautiously and unless you are sure you can make the additional repayment on an increased loan, don’t accept their offers. Bear in mind it will take longer to repay the debt, and you will pay more interest.

Regular repayments

Do you wait until the due date on your credit card statement, before making your monthly repayment? Remember, interest is charged daily. So, if you make small regular payments when you can afford, it will reduce your debt faster, and keep the added interest to a minimum. Every time you have a bit of spare cash it’s a good idea to get into the habit of putting it towards your credit card, rather than waiting until the due date.

One credit card is enough

When you have multiple credit cards, you have multiple fees and charges, and these add up. It’s extremely tempting to keep spending, and your debt escalates. Each month, instead of worry about paying one card you are juggling several repayments, and often “robbing Peter to pay Paul”.

If your credit cards have got out of hand and you are struggling to pay off the debt, look at other options to bring them under control. Consider taking out a consolidation loan, or a balance transfer to one card with a low interest rate.

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Types of credit cards

  • Cards with no annual fee
    There are cards in New Zealand that do not attract an annual fee. These cards are especially useful for people that spend a lot but always pay off their balance in full each month. If you are looking at no annual fee cards, look for one that has also has a competitive interest rate.

Updated November 14th, 2019
Name Product Purchase rate (p.a.) Annual fee Minimum Income
0% for 6 months (reverts to 19.95% APR)
$0 p.a.

Be rewarded with 50 bonus Airpoints Dollars. Simply apply, be approved, and spend $750 on your new Card in the first 3 months of membership.

Compare up to 4 providers

  • Cashback and rewards cards
    Depending on the card, you are paid for your purchases in the form of cash or rewards at a predetermined time. Take a look at the offers available and think whether you prefer to receive money back or if you could use points for future purchases. There is competition amongst card issuers and finding the ideal rewards credit card can take a bit of research. Look for offers that sweeten the deal with double or triple reward points. These cards are great if you spend a lot on your credit card but pay off your balance on time. You will usually need a good credit rating for approval.
  • Airpoints (Frequent flyer) cards
    If you pay off your credit card each month, you may want to take a look at the different Airpoints cards available. These cards are great for people that like to travel and want a little extra help paying for their holidays etc. When you make purchases on your credit card, you receive rewards points that you can use towards rewards, eg car hire, hotels or booking flights.They are especially valuable if you use your cards to make many purchases each month, as you will see your points add up faster and maximise savings on future holidays or flights. If you are planning to get an Airpoints card, make sure you check which airline carriers the card is partnered with, so you can choose the credit card that will earn you the most points per dollar spend with your favourite operator.

Our top pick: American Express Platinum Edge Credit Card

Receive 20,000 Bonus Points

2.99 % p.a.

for 6 months on purchases

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100% confidential application

Our top pick: American Express Platinum Edge Credit Card

The American Express Platinum Edge Credit Card offers a low interest rate on purchases. Earn 20,000 Membership Rewards bonus points when you apply online and spend $750 in the first 3 months of Card membership.

  • Annual fee: $149 p.a.
  • Purchase rate (p.a): 2.99% APR for 6 months (reverts to 19.95% APR) on purchases
  • Cash advance rate: 21.95% APR
  • Up to 55 days interest free
  • Minimum Income Requirement of $50,000 p.a.

Compare Frequent Flyer Credit Cards

Name Product Purchase rate (p.a.) Annual fee Minimum Income
2.99% for 6 months (reverts to 19.95% APR)
Enjoy a low rate on purchases and earn 20,000 Membership Rewards Bonus Points if you apply, are approved and spend $750 in the first 3 months of Card membership.
19.95% APR
Receive 200 bonus Airpoints Dollars when you apply, are approved and spend a minimum of $1,500 in the first 3 months. You will also earn 1 Airpoints Dollar for every $59 you spend on your card.
0% for 6 months (reverts to 19.95% APR)

Be rewarded with 50 bonus Airpoints Dollars. Simply apply, be approved, and spend $750 on your new Card in the first 3 months of membership.

Compare up to 4 providers

  • Balance transfer and low-interest credit cards
    If you have a large balance on a current credit card and are struggling to pay it off, then you may want to consider a balance transfer card. When you sign up for one of these cards, you will receive a very low, or even a 0% rate of interest, for the first 6 to 12 months. Before signing up for a balance transfer card, consider whether you can pay off the balance within the six or 12 month period. When the promotional time has expires, you are expected to pay the standard interest rate, which may be quite high.

  • Credit cards for business
    If you are running a business on your own, you should look into the advantages of having a business credit card. i It can simplify paying taxes and bookkeeping and you can choose one that earns additional rewards like Airpoints. Additional cards for staff can make it easier for them to make purchases and you as the business owner will benefit from the rewards points they earn.

    • Gold and platinum credit cards
      If you are a high-income earner with a good credit rating, you may qualify for one of these premium cards. You are usually rewarded with benefits, such as purchase cover, free travel insurance and contents insurance. You may be entitled to additional features, eg extended warranty cover, airport lounge access and concierge services if you get a platinum or black card.
    Name Product Purchase rate (p.a.) Annual fee Minimum Income
    2.99% for 6 months (reverts to 19.95% APR)
    $149 p.a.
    Enjoy a low rate on purchases and earn 20,000 Membership Rewards Bonus Points if you apply, are approved and spend $750 in the first 3 months of Card membership.
    19.95% APR
    $195 p.a.
    Receive 200 bonus Airpoints Dollars when you apply, are approved and spend a minimum of $1,500 in the first 3 months. You will also earn 1 Airpoints Dollar for every $59 you spend on your card.

    Compare up to 4 providers

    • Student cards
      University students can apply for a credit card that offers a low-interest rate, that helps a student to pay their way through education without fear of ending up with a hefty debt. They also a good way to learn about working within a budget. Naturally, it takes self-control and financial sense to handle a credit card correctly, and if you qualify for another type of credit card (not just a student card) the features discussed above may help you decide which is right for you.

    Are credit cards the ideal way to access finance?

    There is no denying credit cards have their uses, but the danger lies in the fact that it is far too easy to pay for everything with your credit card, be it household shopping, Internet purchases or booking a holiday.

    The only way to manage this mode of spending is to learn discipline when using your credit card and to know how to select the correct credit card for you; otherwise the debt may soon be spiralling out of your control. It comes down to knowing the finance options available to you and choosing one to suit your needs and spending habits. In some circumstances, a personal loan might be more appropriate or a store account that lets you purchase goods with no added interest.

    If you are booking travel or shopping on the Internet, a Visa or Mastercard debit card is another option that avoids interest charges. Debit cards have become more popular in New Zealand in the last few years, particularly for those who can’t afford a credit card. The advantage of a debit card is it provides the convenience of a credit card, but you are using your money instead of borrowing on credit.

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