There are four main types of credit cards offered in Australia. No Annual Fee Credit Cards provide a low cost, no-frills option. Low Rate Credit Cards focus on providing a low interest rate. Rewards Credit Cards allow you to earn and redeem points for a range of rewards, such as gift cards or travel. And Frequent Flyer Credit Cards allow you to earn points in a specific airline frequent flyer program, such as Qantas or Velocity.
No Annual Fee Credit Cards
No Annual Fee Credit Cards offer a no-frills option for fee conscious consumers. They can be a good choice for occasional or emergency use. An important trade-off to be aware of is that No Annual Fee Credit Cards typically have a high interest rate, so if you’re likely to pay interest from time to time, a Low Rate Credit Card may be a better choice.
In addition to No Annual Fee Credit Cards, some credit cards offer an ‘annual fee waiver’ when you satisfy a certain condition, for example spend $5,000 over 12 months. Others offer ‘no annual fee in the first year’ for new accounts.
Low Rate Credit Cards
Low Rate Credit Cards feature a low interest rate on purchases which can make them a good choice if you expect to pay interest from time to time. Some cards also feature a low interest rate on cash advances. Like most credit cards in the market, Low Rate Credit Cards usually enable you to avoid interest on purchases completely by repaying your closing balance in full each month.
Rewards Credit Cards
Rewards Credit Cards are popular as they enable you to earn rewards, such gift cards, cash-back, merchandise or travel, on everyday spend. Rewards points, which are earned on most purchases, accumulate and can later be redeemed for a reward of your choice.
Credit card providers typically manage their own rewards program, therefore the value of a point can vary, making it difficult to compare products. Some Rewards Credit Cards allow you to convert your points to a different currency, for example Flybuys or Velocity Frequent Flyer points.
Rewards Credit Cards with higher annual fees generally enable you to earn points faster, and typically include features such as complimentary travel insurance.
Gift cards tend to be the most popular Rewards Credit Card redemption, and typically offer good value. However, if travel is your focus, then a Frequent Flyer Credit Card may be a better choice.
Rewards Credit Cards typically have a high interest rate, so they may not be the best option if you’re likely to pay interest from time to time.
Frequent Flyer Credit Cards
Frequent Flyer Credit Cards are a type of Rewards Credit Card, allowing you to earn points directly in a specific airline loyalty program. Points can typically be redeemed for flights, flight upgrades, accommodation, and other travel expenses through the airline’s loyalty program. Some programs also allow you to redeem for retail gift cards and merchandise, however flights tend to offer better value.
The main frequent flyer programs in Australia are Qantas Frequent Flyer and Virgin’s Velocity Frequent Flyer program. Most banks have a credit card product linked to these programs, while a smaller group offer credit cards featuring programs, such as Singapore Airlines Krisflyer, and Emirates Skywards.
If you’re interested in Qantas Points, then you’ll have to commit to a credit card that only earns Qantas Points (known as a ‘direct earn’ credit card). However, if Velocity, Krisflyer or points in another airline program are of interest, then you can keep your options open by choosing a general Rewards Credit Card linked to these programs.
Like general Rewards Credit Cards, Frequent Flyer Credit Cards typically have a high interest rate, so they may not be the best option if you’re likely to pay interest from time to time.