How to choose the best credit card for you

As a kid, big decisions were made in the usual ways. Flipping coins, eenie-meenie-minie-mo, closing your eyes and just pointing.

Perhaps that’s the real marker of when you know you’re a grown up – making decisions based on well-considered information rather than chance.

When it comes to choosing a credit card to suit your needs, you need to put on your real-world hat and look at all the options, weighing up the pros and cons and factoring in your own circumstances.

Use this guide to help you look at the situation from a couple of different angles, and to help you choose the best credit card, one that is right for you.

How to choose a credit card

Consideration 1: Do you need a credit card?

The very first question you should ask yourself is do you need a credit card?

If you struggle to keep your finances in check and live from payday to payday, you may need to look at your budgeting rather than at ways to borrow. In many other situations, a credit card can be beneficial when managed properly. A credit card can help you manage your bills by using the card to pay them off then repaying the credit card with regular repayments. It can be a way to make those big purchases that you couldn’t otherwise afford in one go, and it’s a great way to earn rewards points.

Consideration 2: Why are purchase rates on credit cards important?

The purchase interest rate attached to your credit card is almost as important as the long number on the front. You may also see this referred to as the APR, or annual percentage rate.

The purchase rate is the interest rate that’s applied to balances on your account (excluding Balance Transfers or Cash Advances), calculated as an annual percentage. It’s important to know your credit card APR because, if you have an outstanding balance at the end of your statement period, interest charges will be applied using this rate. Some credit cards may start with a lower introductory rate that increases after a specified timeframe, while others will retain an ongoing flat rate.

This means if you manage your finances properly and pay off your entire credit card balance every month, you will able to avoid accruing interest charges on your account.

Consideration 3: What are balance transfer interest rates?

The balance transfer rate applies when you transfer an existing debt from another card or lender to your new credit card.

The percentage interest rate charged on balance transfers can be lower than your APR – even as low as 0% where there is a promotion on offer – but there is usually a time limit attached. It’s still important to keep on top of your repayments, as after this balance transfer period, the interest rate will usually revert to either the APR or the Cash Advance Rate. Remember, with any balance transfer offer, it’s important to read the attached terms and conditions.

See how much you could save in interest with our balance transfer calculator.

Consideration 4: Do you want a rewards program with that?

As if shopping wasn’t enough of a reward in itself, some credit cards are also linked to rewards programs, giving you a little extra bang for your buck when you shop.

The number of rewards points earned can vary from card to card, with some offering one point per one dollar spent, and others offering more. Currently, the Virgin Australia Velocity High Flyer credit card gives customers 1.25 Velocity Points per dollar spent on eligible purchases. Of course, terms and conditions do apply and earn rates whilst accurate at date of publication may be subject to change, so be sure to check the Virgin Money Credit Card website for the latest Velocity Points information.

Once you have accumulated enough points, you can trade them at a virtual supermarket for just about anything you fancy. Virgin Australia Velocity Flyer Cards accrue Velocity Points with every spend, which you can use to purchase anything from travel to toy cars at the Velocity Rewards Store.

Consideration 5: Are there credit cards that help with travel?

Travel and spending go together like Vegemite and toast, and if you know this through experience you might just like the idea of a credit card that offers travel extras.

Some cards may offer you deals on flights, such as reduced fares when you pay with the card. Of course, conditions would apply and you should check these carefully.

You will notice some credit cards also provide complimentary international travel insurance. These policies may be useful for frequent travellers, and are usually activated by simply paying for your overseas flights with your credit card. Be sure to check the inclusions and exclusions of the complimentary travel insurance if this is an important part of your credit card purchase decision.

Consideration 6: What are low rate cards?

As the name suggests, a low interest rate credit card tends to keep the APR at the lower end of the scale.

If you think you might not be able to pay off your credit card in full each month, having a low interest rate could be a great option. This means that even if you spend most of the year with some debt on the card, it may not add up as quickly as it would with a higher interest rate.

Virgin Money’s Low Rate credit card may be worth considering if a low interest rate is important to you. Find out more on the Virgin Money credit card web site.

Consideration 7: Why should you consider the credit limit?

Credit limits are best thought of in terms of Goldilocks – too large and you risk running up a debt you struggle to repay, too small and you may constantly hit the roof. The trick is to find one in the middle, one that’s just right.

The limit is the amount you can spend up to, but no further. If you hit your limit your card may decline, so it may be best to first think about what you want to use your card for. If it’s for the occasional large item purchase (such as whiteware or dining suites) you may need a higher limit to accommodate for such price tags. If you want the card to cover you for the odd splurge on a new pair of shoes or to put petrol in the car, a lower limit may be enough.

Consideration 8: Are annual fees important?

Some cards come with a high annual fee, some with a low annual fee, and some don’t have one at all.

While some may charge up to $300 per year, others will be free.

Virgin Money offers a No Annual Fee credit card, which might be worth considering if you want to avoid the annual credit card fee for the life of the card. Find out more on the Virgin Money credit card web site.

Credit cards are not like a box of chocolates, because you know exactly what you’re going to get – so long as you read the fine print. Make sure you look at the relevant interest rates, rewards programs, limits, fees, and all other fine print in your search for the credit card that suits you.

What are you looking for in a credit card, and does this help in choosing the best credit card for you?