Find the best interest rate
Credit card interest rates can range from 12% to more than 20%. Cards with low interest rates usually charge higher annual fees.
If you don’t usually pay off your card every month, it’s worth choosing the card with the lowest interest rate.
Can’t seem to get that balance down to zero? It can be worth looking into balance transfers. These are special offers to transfer a balance from a current card to a new one with a different lender – but at a much lower interest rate.
When taking up a balance transfer offer to pay off credit card debt, it’s best to cut up and cancel the old card to avoid running it up again. Also, check the details of the offer, as any new purchases might be at a different interest rate.
Check the fees and interest-free days
The more often you pay your credit card balance in full every month, the more you avoid interest charges.
Most credit cards offer interest-free days and charge an annual fee. Fees can be up to several hundred dollars a year and the number of interest-free days can range from 0 to 180.
Sometimes it may seem like you’re paying more than you should, in which case, call the bank and ask for a better deal. If they can’t come up with a better offer, consider changing cards.
For more information about current interest rates, interest-free days and fees visit the interest.co.nz website.
A helpful option: debit cards
Debit cards are an alternative to credit cards with much of the same convenience. However, with a debit card, instead of borrowing money and potentially being charged fees and interest, we spend our own money that is preloaded onto the card. These are much like Eftpos, but with additional credit card features, like being able to be used for online purchases.
Debit cards are helpful for two reasons: we don’t risk spending more than we have, and we avoid the interest and fees that come with credit cards.
But buying on cards leads to us spending more in general – up to 30% more than using cash. Some people like to try just paying with cash for a while as we’re often more reluctant to hand over a big stack of notes for purchases. It’s so easy to swipe a credit card and not feel the impact of the money going out.