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028: Comparing credit cards
383 Plays5 years ago
Decide if you need a credit card and if so, choose the best one for your purchasing and payment habits.
There are over 200 credit cards on offer in Australia, and this episode talks about how you can get the right credit card for you. Things to consider include:
- your spending habits
- your ability to pay off the outstanding balance each month
- your credit score
- the types of credit cards and benefits available.
Mia and Dinah share their top tips including:
- knowing yourself and your spending habits
- considering how much effort it takes to maximise rewards and benefits
- comparing the key features including annual fees, interest rates, sign on and ongoing benefits, and taking into account traps like capped monthly points
- putting reminders in your calendar for the best time to review your credit card arrangements
- calling your bank to see if you can get a better deal to avoid shopping around
- using comparison sites to quickly compare and choose a new credit card that is better than your current one
- setting up a direct debit to pay the statement amount automatically each month.
- Dinah talks about how her Password Manager made it much simple to find her son’s lost school iPad
- Mia talks about her daughter’s netball coach's website and WhatsApp groups he has set up to organise games and training like a pro.
- Dinah talks about a school app that duplicates content and has a really poor user experience.
Dinah talks about the Pineapple Project podcast, an ABC podcast hosted by Claire Hooper and in particular Series 3 - Tidy.
RESOURCESMoneySmart.gov.au - criteria to help compare and choose
Credit Score - Ways to access your credit score for free
Credit Card Comparison Site - Canstar
Credit Card Comparisons - Frequent Flyer Rewards - Choice
Podcast - Pineapple Project - Series 3 - Tidy
SHAREPlease head to the Life Admin Life Hacks Facebook page to connect with listeners and share your thoughts, questions or suggestions.
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Transcript
Introduction and Event Promotion
00:00:00
Speaker
Charlamagne to God here. I can't wait to see you at the Black Effect Podcast Festival coming to you live on Saturday, April 22nd at the Pullman Yards in Atlanta, hosted by myself in Jesalax. If you haven't gotten your tickets, what are you waiting for? The Black Effect is bringing some of the hottest podcasts live, like the 85 South Show. Horrible decisions and big facts for one day only, okay? For inspiring podcasters, we've got you covered. If you don't want to miss the Black Effect Podcast Festival, make sure to get your tickets today at blackeffect.com.
00:00:27
Speaker
like a good neighbor, State Farm is there. This is Life Admin Life Hacks, a podcast that gives you techniques, tips and tools to tackle your life admin more efficiently to save you time, your money and improve your household harmony.
00:00:42
Speaker
I'm Dinah Ru Roberts, an operations manager who finds joy in creating spreadsheets to compare different credit cards. I'm Mia Northrop, a researcher and writer, and I go weeks at a time without using cash. Is that the new normal? I think it is.
Credit Card Insights and Evolution
00:00:56
Speaker
This episode will help you understand if you actually need a credit card and how to decide if you've got the best one for you. Hello and welcome to Life Admin Life Hacks.
00:01:06
Speaker
The average Australian credit card balance is just over three grand, according to comparison website finder. And of that amount, about two thirds, that's one thousand nine hundred eighty six dollars, is the average amount accruing interest. Oh my God, that's so much money when you consider what the average rate is on a card. About one third of our survey respondents feel like they are wasting money or things are out of control when it comes to credit cards. There are definitely tips and traps that can have you paying interest on purchases.
00:01:36
Speaker
So credit cards, when they were originally invented, they were a cash flow tool, something you would use to buy if you didn't have the cash. But, you know, over time, this has really changed. And Epos has made credit cards a convenient way to pay. And then since e-commerce has evolved,
00:01:53
Speaker
credit cards have become more and more of a necessity. And now that credit cards offer the convenience of contactless payment and paying for your purchases after an interest-free period rather than paying for them immediately, they've become something that almost everyone seems to have.
Choosing the Right Credit Card
00:02:09
Speaker
Yeah. I think what's important is that you require the right card for your spending habits.
00:02:15
Speaker
and you need to understand how disciplined you can be in paying off the balance in full. There's plenty of people who often like to have credit cards and only buy something when they have the cash because they know that they would either be impulse buying or they would not be able to meet the payments each month.
00:02:34
Speaker
they might use a Visa debit card for the convenience of those electronic transactions without actually incurring debt. So this is really territory you want to wade into if you are confident that you can actually pay off the balance each month. Yeah. And I think that if you know that you're one of those people who's going to pay the full balance each month, make sure you buy
00:02:57
Speaker
get a credit card that suits that, so a credit card that has more interest-free days. But if you know that you're someone who actually does use the credit card as a source of credit to be able to pay for things you can't yet afford, you really need to think about making sure that you get credit card that has a really low interest rate, because credit cards are a really expensive way to borrow,
Understanding Costs and Rewards
00:03:19
Speaker
really. Well, officially, they are the second most expensive way to borrow after those dodgy payday lenders who, you know,
00:03:26
Speaker
We were like akin to a pawn shop. So you need to ask yourself, can you afford the annual fee? Can you afford the full monthly payments? Are you likely to impulse purchase and how good is your credit score? Because if your credit score is wonky, you do not want to be going into credit card land where you might be damaging it even further. And you can check your credit score for free. There's a few different services that offer that and we'll link to that in the show notes.
00:03:52
Speaker
So I had a look at the Canstar comparison website, which does a pretty good job of describing the different types of cards out there and presenting the options in the market. And they make the point that, you know, there's different types of credit cards for different types of spending habits. So what's ideal for one person can be a disaster for someone else. So the first type of credit cards, your most basic, they're the low rate cards.
00:04:17
Speaker
these have low interest rates and they're good if you don't always pay the balance off in full and you probably won't be just be paying the minimum repayment instead. And then the next type are the low fee or low annual fee cards. They're suitable if you don't use your credit card very often and you're not interested in reward schemes. Then you have all the credit cards that offer rewards. So these usually have high interest rates
00:04:41
Speaker
but they might offer points for cash back or give you vouchers or you can use the points on merchandise. And these will suit people who are paying that total balance off each month because that's the way that you avoid paying the high interest rates.
00:04:54
Speaker
And the next type, I guess, are a different type of reward card. They're the ones that are linked to the frequent flyer programs. And these are credit cards where you can redeem the points for flights. And often you get particularly more points if you're using the cards to purchase travel-related items. These are also more suitable for people who pay their full balance each month, but also you also need to be a member of the relevant frequent flyer program.
Managing Credit Card Perks
00:05:19
Speaker
And then the last category is sort of that premium category where you get all the bells and whistles with the travel insurance. You get inconvenience cover and price protection and purchase protection. You might get extended warranty cover. And again, these have usually the highest annual fees into the hundreds and hundreds and hundreds of dollars. They'll have high interest rates. So you really want to be paying the closing balance off in full each month.
00:05:45
Speaker
So if you decide you really want to have a credit card, it really can feel a bit overwhelming to decide what kind of card you need. So the first step, which we've already alluded to, is you really need to know yourself and know your spending habits. But I think it goes a little bit further than that. You really need to know how much effort you're willing to go to to get some of these
00:06:08
Speaker
rewards and how mindful you'll be of some of the trips and traps that you might fall into. And also how much complexity you want to add. So in the past I used to be a really frequent switcher of credit cards, but the reality is that there's quite a lot of work involved in changing direct debits, in doing the research and in making the switch. And if you don't have your credit card with the same bank that you have your current banking arrangements with, that also just makes it a little bit trickier
00:06:37
Speaker
to make payments and things. So you really need to think about how much effort you're willing to go to for some of these perks before you get started. Yeah. So if you are interested in comparing, there's a few things you need to think about. First of all,
00:06:52
Speaker
decide which network you want to be with, Visa or American Express or MasterCard or Diners. I just find it fascinating that MasterCard and Diners still exist. And I have been someone who has had an American Express card in the past, the number of places that don't accept it or charge additional surcharge fees. I find the whole network competitive
00:07:19
Speaker
play just very curious about how they all still survive. Anyway, decide which one you want to go with. What are you going to compare? You're going to compare the interest rate. Often there'll be a promotional period where they're going to try and lure you across and offer you a low interest rate for a certain stretch of time, and then there'll be a standard interest rate. You need to compare the annual fees.
00:07:40
Speaker
And again, sometimes the first year will be a lower rate or might even be free. And then what the subsequent annual fees for other years you need to take into consideration. You need to compare the credit limit that they're going to give you. There might be a minimum credit limit up to a maximum. And then if you're going to be transferring the balance of your current credit card to this new credit card, there might be a special interest rate for that transfer.
00:08:04
Speaker
But I think that what you certainly might experience, the thing that most people are comparing is the benefits, and in particular, the frequent flyer and the rewards points are what seem to drive people to switch one credit card to another. And certainly that's what drove me in the past to switch, particularly when you sign on for a new credit card, there's often a whole bunch of bonus points that you can get at the start.
00:08:30
Speaker
I think this is where if you really want to optimise it, sadly, there is no nothing better than a good old spreadsheet. Very specific rules about how many points you can get in any month, whether you get points for some purchases. So some credit cards don't give you points for utility bills, for example, or for tax office payments or things like that. And as well as
00:08:59
Speaker
then if you get some big sign-on points in the first year, and I think this is something that I fell into the trap of in the past, is you might pay a really high annual fee, but they might waive it for the first year, and then all of a sudden that year rolls around, and all of a sudden you're paying this big annual fee, and it's actually not worth it, but you can't get a refund once you get past that, once you've paid the fee, it's gone.
00:09:22
Speaker
Yeah. Yeah. So I think you're right in that a lot of people do start to focus on the benefits when they're comparing.
Reviewing and Negotiating Credit Card Terms
00:09:29
Speaker
They can be pretty alluring. And when I was researching this, I did actually end up applying for a new credit card because I realized mine was one of those out of market offers. I've had it for several years. They don't offer
00:09:43
Speaker
what it's called anymore, and there are a lot better deals out there. I was looking at the frequent flyer points and the travel insurance and the purchase protection. One of the things I've always been intrigued by was those concierge services where you get access to tickets and things, which I always think, oh, that'll be so cool. Exclusive releases
00:10:04
Speaker
I have never once taken advantage of that. I've gone in there. I've signed up for whatever they are. I have never once purchased tickets to anything that way. So you need to know which of the features and benefits are actually going to make a difference to your life. For me, it was all about the frequent flyer points because I knew mine were capped.
00:10:23
Speaker
at a certain monthly limit and for a while that wasn't a big deal because we wouldn't often spend more than that monthly limit but then our spending you know is often double or triple the amount that is eligible for rewards points so that's what that was my big trigger for wanting to leave.
00:10:43
Speaker
I think interestingly, Mayor, I think there's lots of parallels here with private health insurance and utilities. And is that, you know, once you're on these credit cards, you kind of have that set and forget mentality and you don't think you go back to review it. And often they do, they de-scope the scheme. They might actually change the rules and you probably get a letter, but if you don't pay attention at the time,
00:11:05
Speaker
And all of a sudden, you can actually be paying an annual fee for a card that's actually not that good anymore. But if you are paying an annual fee, it is worth putting a reminder in your calendar a month or so before the annual fee is going to get taken out of your card to have a quick look, even if it's five or 10 minutes, to think about whether you want to stay with that card. And you can even just ring the bank, just like we've talked about with home loans.
00:11:31
Speaker
just ring the bank and say, oh, I think that, you know, I don't know. What could you do for me? Annual fee. And sometimes they'll just waive the annual fee. So it's really worth that. That, Colin, if you know you're paying a two or three hundred dollar annual fee on your credit card, it's definitely worth five or 10 minutes on the phone call on the phone. Absolutely.
00:11:49
Speaker
If anyone listening has a credit card that I've had for more than two years, I would recommend that at the minimum they call their current provider and just say, you know, this is what I've got. Is there something better you can do for me? But if you are more curious about optimizing, it's worth spending the time to research. And I literally just jumped on the CanStyle website and did it that way.
00:12:11
Speaker
I have had my card, as I mentioned, for several years and I was shocked at how few points we could be getting. I know that banks change their card offers regularly and that my card was no longer promoted. So I jumped online and I ended up applying for a different Quantris rewards card.
00:12:32
Speaker
It gets bonus points for moving across, like 80,000 bonus points, which is a whole bunch of flights. I can actually book some flights with that. It's got a lower annual fee.
00:12:44
Speaker
It has a lower interest rate, it has uncapped points, it has the same kinds of travel insurances.
Streamlining Finances and Payments
00:12:50
Speaker
You get lounge access a couple of times a year, they throw in some birthday rewards. So it was kind of a no-brainer for me to just move across without having to feel like I had to research every single credit card in the market. Because once I saw that the interest rate and the annual fees were lower, but I'm getting uncapped points and I'm getting bonus points, it was kind of like, oh, let's just shift it.
00:13:11
Speaker
Yeah, and I think you can make those really quick decisions or you can spend a lot of time trying to analyze exactly. And I know there's a bunch of people who spend a lot of time trying to absolutely maximise their points. And I definitely used to be that person. Whereas more recently, when we changed our home loan, I made the decision to try and simplify our banking, including our credit cards. And so I moved our credit card to the same bank where we have our home loan. And we don't get frequent flyer points. We actually get
00:13:40
Speaker
just E points and I regularly use those points to buy Woolworths vouchers and I use them to buy my groceries every, you know, every couple of months I get a $500 Woolworths voucher. And then for me that means I can fly with whichever airline provides the best feel. We're increasingly using, you know, the discount airlines and so it means that I don't sort of feel locked into Qantas or to Virgin. I feel like I can
00:14:09
Speaker
you know, choose whichever airline is giving us the best deal. The $500 voucher for Woolworths is really substantial. That's great. And you actually even get 5% off the voucher when you buy it through the bank. So it's great. It's something I know that we will use. Even though we would use the frequent flyer points, I feel like I'm getting real value immediately on something that, you know, I'm not tempted to go on a weekend away simply because I've got frequent flyer points. I'm, you know, looking at for something we actually need.
00:14:39
Speaker
Yeah, that's great. I guess the one hassle that I'm not looking forward to that'll be part of this process is updating all my direct edits.
00:14:47
Speaker
Yeah, and I think it's worth thinking about when you might want to change cards because the reality is you have to change those direct debits when your card expires usually. So if you want to think about when's a good time to switch credit cards, it's worth adding a reminder into your calendar a couple of months before your credit card is going to expire because the reality is you can have to do it anyway. So you might not get a better credit card at the same time. Nice idea.
00:15:16
Speaker
How do you feel about automatic credit card payments where you set up a direct debit to pay off the credit card in full each month? I actually think it's just a must have is my personal opinion. I do think that if you're kind of finally balancing your accounts,
00:15:31
Speaker
that you probably also need to put some sort of reminder system in so that you know what's gonna happen in case you need to do some transfers. But I definitely don't think you ever want to be paying their high interest rates that you would pay on a credit card. And I think one of the things that people don't realize is that if in most credit cards, and I'm sure there's some variations, but in most of them, if you don't pay the full balance by the due date, you start to accrue interest. And the only way you can then stop that interest being
00:16:01
Speaker
accrue is to pay the entire card off, not the amount that was due on the last statement. So you have to completely clear the debt and get it to zero and then they'll stop charging you interest. I didn't know that. It's very easy to get into a cycle if you miss the payment by one day and then all of a sudden you're paying interest for several months before you actually realize that that's the problem. Huh, I didn't know that. I thought if you paid a day late, you know, and you paid the statement balance,
00:16:30
Speaker
you wouldn't, you know, you'd only be accruing interest for one day on that statement balance, not the whole outstanding amount. I actually had a dispute with the bank once when I didn't have a direct debit set up and I short paid by five cents and then they started charging me interest on the full balance and it was only several months later that I looked closely enough at the statement to see the interest
00:16:53
Speaker
And when I rang them up, they said, well, you didn't pay the full balance. And so therefore, interest becomes due on the entire balance ongoing. So yeah, really be mindful of that.
00:17:05
Speaker
Yeah. I've always manually paid my credit card because I like to go through the statement and read everything and make sure everything's legit in the, how old am I now? The 25 say years that I've had a credit card. I've maybe had no more than five disputes and usually it's just a misunderstanding with my partner about a transaction. So I think
00:17:30
Speaker
going forward i will actually be setting up this automatic credit card payments you know you still get sent the statement it'll still be a trigger to go and check it but i don't have to be remembering to do that you know and yet another internet banking transfer to to pay it more automation will be great
00:17:46
Speaker
Yeah, and I think that, you know, with internet banking, you can be looking at your credit card transactions whenever you want. Yeah. So I do think that, you know, sort of waiting till the statement comes is probably not ideal because as you say, you sort of forget because by the time the statement comes, you're looking at transactions more than a month ago.
Credit Card Comparisons and Resources
00:18:04
Speaker
So it's much better to be kind of keeping an eye on transactions as you go rather than waiting till the statement comes. Yeah, I'm never going to do that.
00:18:15
Speaker
Oh, you know, my heart and I, we're not outlandish spenders. It's very rarely something on that. It's not blindingly obvious. It's actually quite depressing when you look at it. It's just petrol, supermarket, the occasional meal, some clothes purchased for a kid or the random direct debits that come out for utilities. And so, yeah, usually not not that hard to decipher. All right. So hopefully there are some ideas there for people who want to think about their credit cards. You've got some criteria there about
00:18:45
Speaker
The features that you need to compare recommend going to somewhere like the Canstar website. Choice also looks at credit cards and compares the different kinds of rewards to see whether it's worthwhile. But again, it's one of those things where you don't want to boil the ocean. Don't feel like you have to compare every single credit card in the market. If you literally find something that's got a better interest rate and your fee and does what it needs to do for you for points or rewards or any other bells and whistles,
00:19:14
Speaker
make the switch. Okay, Dinah, do you have a life admin hire of the week for us?
Family and Organizational Anecdotes
00:19:20
Speaker
I do. So when we talked about setting up, we had an episode talking about setting up screen time for our kids to better manage their digital security. I had set up screen time for my son on his school iPad.
00:19:34
Speaker
And recently he couldn't find it anywhere and he was sure that it was because neither his father or myself or his sister had moved the iPad. Outrage! He was sure that we were the ones. And so I was like, no, never fear. I will use the Find My iPhone app to find your iPad.
00:19:52
Speaker
But what I didn't actually realize was that because I'd locked down location services in his screen time, I could never use to find my iPhone to find his iPad. And so for one minute, I had the fear that I was never going to find this iPad again. But because I had his password saved in my password manager, I could actually still log into his iCloud and both add a message on his iPad that said this is
00:20:20
Speaker
you know, this person's iPad, please give it back to him. But I could also say that it was actually in the school somewhere. And so we could very clearly clear up this problem, which if I'd forgotten what his iCloud password was, I would never have been able to do. So five minutes, problem averted, and iPad safely returned to him the next day at school.
00:20:41
Speaker
Oh, fabulous, crisis, crisis over. So do they have iPads at school? Like all the kids have to have iPads? Yeah, all the kids from grades three to six have to have their own iPad. The personal iPad. And this is a state school. A state school, yep. That's a whole nother episode that's got nothing to do with men. That's not going there, but outrage. Yeah, that sounds really stressful. And it's funny because
00:21:08
Speaker
My husband has lost his, well, our family iPad. He hid it somewhere when we went on holiday as part of his home security measures. Very high, valuable things. Now he doesn't remember where he hid it and we can't find it. And because the battery died, we can't use the Find My iPhone app. It'll just turn up wedged behind a bookcase when we move house or something. Probably, yes. For more outrage.
00:21:36
Speaker
My life admin hire of the week also has to do with my child. My daughter's playing netball. She's in a new team with a new coach. The coach has created his own website that has the details for every match with the date, the time, the player roster, who's captain, who needs to bring the oranges, who's going to be in the goals and needs to practice goal shooting. It is just an organizational marvel to behold.
00:22:04
Speaker
He sends, he set up a WhatsApp group. He sends these little messages about the weather forecast training and the weather forecast with the game and all of the arrangements. And it is just an organizational dream. That is so next level. Is this like a professional coach that you're paying? No, he's like a dad at the school. I think he must be a developer. So he's made this little website and come up with his own little app.
00:22:30
Speaker
I hope that he's trying to sell this to people because it's amazing I think for himself in terms of the planning for the season and for the parents and I just
00:22:39
Speaker
Oh, it's just a project. It's like a little organizational nerd, process nerd. I think it could be more fantastic. Diana, do you have a life had been low of the week? I do. I've got another one related to children. I think we maybe need to put a ban on highs and lows related to children. But my daughters started at a new school, and so with a new school comes a new app.
00:23:02
Speaker
And the app is really useful. It's got lots of great things about it, but it has a parent communication app. Yeah. And it's also the kids use it as well. So they have this to their own version of the app where the teachers sit homework and things and as a parent.
00:23:17
Speaker
I can actually see what their homework is and things like that, which is really helpful. But they've got a really incredible feature that they have messages and notifications, and most of the information appears in both places.
00:23:35
Speaker
And so and you get notified when there's a message or a notification and then there's duplication of content. And then it's really unclear what you have and haven't read. And it's incredibly frustrating because there are a lot of messages, a lot, a lot of messages. So it's just a really bad user experience. So very frustrating. R School has a parent communication app as well. And it is also an abysmal user experience.
00:24:03
Speaker
I'm not sure how these people sell these apps to these schools. But yeah, that sounds like a drag. It is. But I guess it's digital. At least there's fewer trees being chopped down, bits of paper floating around. Which is very true. And I mean, it's definitely better than trying to manage, you know, 27 forms for filling in permission slips. Yeah. But yeah, it's not, you know, user experience design is a thing. It could be beautiful.
00:24:29
Speaker
How about a power tool?
Podcast Recommendations and Wrap-up
00:24:31
Speaker
I think you've been telling me about this awesome podcast you've been listening to lately.
00:24:35
Speaker
Yeah, and I've listened to a couple of the series, but actually the podcast is called The Pineapple Project. And series three by Claire Hooper has a whole bunch is the theme of the whole series is tidy. And they've got a couple of really great episodes relevant to life admin, including one around tidying up your paperwork, some really great tips in there, really short, accessible episodes, sort of 15 to 20 minutes, quite lighthearted. I really encourage you if you're looking for a new podcast to try that one.
00:25:05
Speaker
So that's an ABC podcast, isn't it? It is, yeah. Yeah. And I really like Claire Hooper. She's very funny. You know, it's a really it's a fun approach to something that can be quite, you know, can be a bit dull and dry. All right. So we hope that this episode on credit cards has presented some hacks that will be useful for you. We suggest that at the minimum, you call your current credit card provider if you have a credit card and ask them what better deal should you be on?
00:25:32
Speaker
Make sure if you're going to compare alternative cards that you know yourself and get the right card for you. Think about how you've been using yours in the past and what you need for the future. Diarise when your credit card is set to expire and then plan to make your changes in the months leading up since you'll possibly need to be making new direct debit arrangements anyway.
00:25:56
Speaker
If you'd like to join us on our life admin journey, please head to our Facebook page, life admin life hacks to follow us and share your thoughts on what we're doing and feel free to post any comments or certainly post suggestions that we might be able to use. We hope to see you there. Thanks for listening. Show notes for this episode are available at life admin lifehacks.com. If you're a fan, please subscribe and share the love and tell a friend or review us in your podcasting app.