How to make Credit Cards work for you
Smart Money

How to make Credit Cards work for you

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Comparing credit cards, you may have noticed some have introductory offers attached. Designed to entice new cardholders to apply, these offers can come in all shapes and sizes, providing savings on purchases or balance transfers over an introductory period, a reduced annual fee for the first year, or a chunk of bonus points to spend within the card’s rewards program.

While these offers may be used by card providers to attract new business, they can be incredibly beneficial to the cardholder as well. But, if you want to make the most of these offers, you need to understand how they work, what to look for, and how to utilise them to their full effect.

Purchase Offers

What is it?

A purchase offer provides a low rate of interest on purchases over an introductory period. This introductory rate could range from 0% to 6% p.a., with introductory periods usually ranging between 6 and 12 months.

How does it work?

When you use the card, any purchases you make within that introductory period will attract the introductory purchase rate. If you choose an offer with 0% p.a. over 12 months, you will pay nothing in interest on your purchases in the first year.

Why use this offer?

A purchase offer can provide an awesome way to save on interest, allowing you to buy the things you want now, to then pay it off over the introductory period with low or no interest accruing. Whether it’s a large purchase, such as a holiday or new TV, or just everyday spending, using a purchase offer gives you more freedom to buy what you want as you pay less in interest.

How can you make it work for you?

Try to choose a purchase offer with the lowest rate offered over the longest time. Think about what you want to buy, but only buy what you know you can afford to pay back within the introductory period. Create a repayment plan and set up automatic repayments if that helps.

Balance Transfer Offers

What is it?

A balance transfer offer provides a lower rate on balances transferred over a specified period of time. Balance transfer rates can start at 0%, and typically range between 6 and 12 months, but can last longer.

How does it work?

You transfer a balance (or multiple balances) you want to pay off to a balance transfer card to enjoy a much lower rate of interest over a introductory period. Depending on the offer, you may be able to transfer an existing balance from other credit cards, from store cards, hire purchase agreements and even personal loans.

Why use this offer?

Using a balance transfer, you could save on interest on your transferred balance, allowing you to pay it off faster as you pay less in interest overall. This could also allow you to consolidate your debt, making it easier to deal with, and less stressful than juggling multiple debts.

How can you make it work for you?

Use a balance transfer calculator to work out how much each offer could save you. Think about how long you will need to pay off your transferred balance, and choose an offer that allows for this. Avoiding new spending can make it easier to clear your balance in time, as can setting up automatic payments.

Annual Fee Offers

What is it?

An annual fee offer either waives the annual fee or reduces it, usually for the first year of having the card. Some annual fee offers will waive the annual fee each year you spend a certain amount on the card.

How does it work?

You pay no annual fee or a lowered annual fee for the first year, or the period of time stated in the offer. Ongoing annual fee offers require a minimum spend each year, allowing cardholders to keep costs down with their everyday card spending.

Why use this offer?

First and foremost, an annual fee offer allows you to save money. However, it can also help you to get more value from a card, which can work well for rewards cards. You may also want to use an annual fee offer to get a feel for a card, working out whether it provides something you need, while paying less. This can be a great way to try out premium cards.

How can you make it work for you?

Be sure to find out what the standard annual fee is – and that the card still offers value at this higher cost. If you don’t think it offers value, or if you cannot afford the ongoing cost of the card, it may be a good idea to cancel it before you pay the first annual fee in full.

Bonus Points Offers

What is it?

A bonus points offer provides a chunk of ‘bonus’ points to new cardholders to be redeemed within the card’s rewards program. The number of points offered usually depends on the tier of the card, for example, classic cards will usually offer the lowest number of bonus points, platinum cards offer a slightly higher amount, and black cards offer the most.

How does it work?

Bonus points are usually only available to new cardholders. They typically come with a minimum spend requirement, which requires the cardholder to spend a certain amount on the card within a given time period. After meeting that spend, the cardholder will be credited with their bonus points to redeem as they like.

Why use this offer?

A bonus points offer can really boost your points balance. You could use those points straight away, or stack them up for future use. Depending on the points on offer, they could take you away on an adventure, or help you indulge in some retail therapy. Bonus points can also add value to the card, helping to balance out the card’s annual fee in the first year.

How can you make it work for you?

Make sure the minimum spend requirement is one that you can afford, and that you are able to repay that spending before it accrues interest. Check the value of the points on offer, and ensure the rewards program provides rewards you actually want.

Want to check out some of the best introductory offers? Compare offers on CreditCard.co.nz now to find the one that best suits your needs.

Founder - Roland B Bleyer

Roland Bleyer

Founder of Creditcard.co.nz. Roland has extensive knowledge about credit cards in New Zealand. Known as a credit card expert, he has been featured on tv and in various publications.
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