Shopping for a credit card? Compare the nine different card types available and find the right one for you.
There’s an array of credit cards in the New Zealand market from which to choose. While this means choice, it also means it can be difficult to choose one option. If you’re struggling to decide which type of card is right for you, use this guide to weigh up the key features, benefits, and costs of the different types of credit cards.
No annual fee credit cards
The name says it all: No annual fee credit cards don’t charge a yearly account fee. While this can help you save money on credit card costs, it’s worth noting these cards often have high standard purchase rates, which means you shouldn’t carry an outstanding balance on a card like this. If you rarely use your credit card or save it for emergencies, a no annual fee credit card is a worthwhile option to consider. While some cards come with no annual fee for the life of the card, others only offer the $0 annual fee for a promotional period (such as 12 months). Once the promotional period ends, the standard annual fee applies. Make sure you understand the conditions of the no annual fee before you apply for the card.
Who are no annual fee credit cards suited to?
If the card has a lifetime no annual fee feature, it usually means a higher interest rate, which is suitable for people who always pay their account balance on time and in full. It is also appropriate if you rarely use your card and only want to keep one for emergencies or occasional need. Meanwhile, promotional no annual fee offers work best for people who don’t intend to keep the card beyond its promotional “no annual fee” period.
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Low-interest rate credit cards
While the average credit card interest rate is around 20-21% (and can be as high as 26% p.a. – the Gem Visa credit card), low-interest rate credit cards offer rates as low as 13.45%. Some cards even offer 0% interest for an introductory period, which reverts to the standard rate when the promotion ends. If you have some purchases in mind and know you struggle to repay your balance each month, this card may help you save on high costs. Please note, this rate usually only applies to purchases, so cash advances, balance transfers and other transactions will accrue a higher rate. Most low-interest cards also charge an annual fee, so you want to make sure the cost of the card doesn’t outweigh the interest savings.
Who are low-interest rate credit cards suited to?
If you struggle to pay your balance in full each month, a low-interest rate credit card could help you save on the interest you usually pay. If you have a purchase in mind (such as furniture, electronics or airfares), a low-interest rate card will help you repay the cost without accruing interest fees. As low-interest cards rarely come with extra premium features, it is a good option for those who are looking for a no-frills card to help manage their cash flow.
Balance transfer credit cards
A balance transfer refers to when you move existing debt that is accruing high interest from one or more credit accounts to another credit card with a 0% promotional balance transfer rate. While the 0% balance transfer is in place, you can consolidate and pay off your debt without the cost of interest. These promotional rates are only in place for an introductory period (of usually 6 to 12 months) and revert to a higher rate (typically the standard purchase or cash advance rate) when the promotion ends. While you are only required to pay the minimum repayment each month, it’s important to pay as much as you can each statement period to pay off the balance before the promotional period ends. Otherwise, the remaining debt will continue to grow as it starts to attract the revert rate.
Who are balance transfer credit cards suited to?
A balance transfer credit card is a useful tool for cardholders who are looking to consolidate and pay off their debt without the cost of interest. As purchases are restricted by the length of the promotional period, balance transfers are good for cardholders who want to pay off their debt before the deadline. If you plan to make purchases with your card, a balance transfer credit card isn’t for you. Usually, repayments are allocated to whichever balance is collecting the highest interest, so your repayments will go to purchases first if they’re accruing the standard rate. If a promotional balance transfer rate is in place, you should concentrate on paying off the debt rather than using the card for purchases and racking up more debt.Compare balance transfer credit cards here
Rewards credit cards
Rewards credit cards let you earn points as you spend, which you can then redeem for rewards including flights and Airpoints transfers; hotel accommodation; gift cards and shopping vouchers; lifestyle products and entertainment events. Many of these cards also come with travel and lifestyle perks tailored for frequent travellers, including airport lounge access and complimentary travel insurance. Rewards cards usually charge a premium for these benefits, such as higher interest rates and annual fees, which makes it essential to consider whether the value of the rewards you earn will offset the card costs. Also, bear in mind the points caps and point expiry conditions that apply to some of these cards.
Who are rewards credit cards suited to?
Rewards credit cards are most suitable for people who charge a lot of expenses to their credit cards but are disciplined enough to pay off their account balance monthly. The high-spending requirements of most of these cards also make them better suited to people who are high-income earners, big spenders and those genuinely keen on earning and redeeming rewards.
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Airpoints credit cards
Airpoints credit cards are a reward credit card that are linked to a frequent flyer program, for example Air New Zealand and its Star Alliance partner Airlines. These cards strictly earn and redeem Airpoints rewards dollars. The redemption possibilities are similar to other rewards cards: You may use your points for flights and seat upgrades; to book hotel stays and car rentals, or exchange them for gift cards; shopping vouchers; electronics or other products. These cards may have other perks associated, such as lounge passes, priority check-in or complimentary upgrades.
Who are Airpoints credit cards suited to?
This type of card is most appropriate if you are a frequent flyer and like to pay using points. Just as with rewards credit cards though, Airpoints credit cards typically come with high annual fees and interest rates, so you should only get this card if you’ll benefit from the perks and are disciplined to pay your monthly balance in full.
Gold, platinum and black cards
These cards represent an elite subset of credit cards, catering to the higher income demographic. They have higher minimum credit limits and offer more luxury benefits, such as travel insurance; business class lounge access; concierge services, or higher reward point earning rates. They also charge higher annual fees in exchange for these benefits. As premium options, the eligibility criteria for gold, platinum and black credit cards are stricter when it comes to your credit score and minimum income requirements.
Who are gold, platinum and black credit cards suited to?
These cards are ideal if your yearly income meets their approval requirement, and if you’re a frequent traveller looking to ramp up your points-earning potential and enjoy some complimentary extras at the same time. Since they usually charge high-interest rates, this type of card is probably not for people who wish to carry a balance from month-to-month.Compare gold, platinum and black credit cards here
Student credit cards
Student credit cards are designed specifically for people studying at an accredited university or educational institution. They usually have low-annual fees that may be entirely waived if you meet the eligibility requirements. As students normally don’t have high incomes, these cards typically offer low-credit limits, which may start from as little as $200. Also, if you don’t meet the income requirement, you need a cosigner to bear the liability for any debt you might fail to repay.
Who are student credit cards suited to?
Student credit cards are perfect for students who want more flexibility with their cash flow or who want to start building a good credit history. These cards are a great way to practise money management and can give you access to extra freebies like purchase protection and extended warranties on purchases.
Business credit cards
Business credit cards are tailored for businesses, with features that are designed to keep track of company expenses, manage cash flow and maximise rewards earning. Business credit cards essentially operate the same way as personal credit cards with credit limits, annual fees and interest rates, except they come with specific features to aid business management. These features include the ability to customise spending limits on different employee cards; the ability to track expenses, and complimentary analytics tools designed to help with business reporting and budgeting. Some business credit cards also give you the ability to earn rewards for your spending.
Who are business credit cards suited to?
If you run a business, this is an ideal way to stay abreast of business expenses and streamline your accounting processes. As with personal credit cards, there are different types of business credit cards, so you should compare them before choosing the most appropriate one for your business.
Travel credit cards
Travel credit cards are designed for overseas use, and offer such perks as 0% foreign transaction fees or free international ATM withdrawals. They may also provide 0% purchase interest rates for a period, which allows you to make repayments without having to worry about interest. A key benefit of using travel credit cards as opposed to cash or travellers cheques is the safety and convenience of carrying plastic instead of wads of cash. Another potential advantage is the ability to tap into the day’s current exchange rate, instead of being locked into an exchange rate.
Who are travel credit cards suited to?
Travel credit cards could be handy for frequent travellers or cardholders with an upcoming holiday. When compared to using your regular credit card abroad, having a travel credit card can save you substantial fees on currency exchange and ATM withdrawals. Remember, even if your card has a 0% promotional purchase rate, this does not apply to amounts you withdraw from the ATM. Cash withdrawals are levied with a cash advance fee and charge interest at the higher cash advance interest rate immediately. If you plan to make international cash withdrawals, making a prepayment on your account or using a debit card can help you avoid interest fees.
There is no better or worse credit card, as each option is suitable for a different kind of spender or borrower. This is what you need to figure out about before deciding what sort of credit card to get: Which type of spender or borrower am I?Back to top