6 things you need to know if you’re getting a credit card in 2021
Keep these details in mind to help you save time (and money) finding a new card in the New Year.
After a bumpy 2020, there's no doubt we all want a better year ahead. While it's going to take time for the economy to recover and Australia to open up, one step we can all take right now is to look at our money goals.
Almost everyone in Australia would have noticed a change to their finances in 2020. Data from Roy Morgan Research found that 27.3% of all Australians made changes to support themselves through COVID-19, including payment pauses, rent reductions and early super withdrawals. That figure jumped to 51% for people who lost employment or other forms of income.
On the other hand, some people changed their spending patterns during lockdown and many even saved more.
Whatever impact 2020 had on your money, re-focusing now will help you get on the front foot for 2021 and beyond.
If your plans include a credit card – whether it's switching for a better deal or getting one for the first time – these six factors will help you find a card that fits your goals both now and in the future.
1. The value of introductory offers depends on your goals
As soon as you start looking at new credit cards, you'll see a mix of introductory offers that range from 0% interest rate periods to bonus points, cashback or gift cards. The real key to getting value from these deals is to choose one that fits with goals you already have.
For example, say you have a lot of shopping you need to do at the start of 2021 – a time when many of us will be back at the office, getting kids back to school and also starting new projects.
If you wanted to use a credit card to cover these costs, you could save on interest charges by getting one that has an introductory 0% p.a. interest rate for purchases – such as the Bendigo Bank Low Rate Credit Card, which currently offers 0% p.a. on purchases for 15 months when you apply by 31 January 2021. It also offers a $150 Woolworths Supermarket Gift Card if you spend $1,000 or more on eligible purchases in 90 days from opening your account, which could give you extra value out of the card.
As another example, if you already had credit card debt then taking advantage of a 0% balance transfer offer could help you pay it off.
So when you start looking for your new card, keep your goals in mind so you can focus on introductory offers that match up with them.
2. The ongoing rates and fees can give you an idea of a card's value
If you're looking at cards that have introductory 0% interest rates, waived or reduced annual fees and other benefits, don't skim over the other features.
The interest rate or annual fee that applies after the introductory period ends will add to your overall credit card costs, so budgeting for them will help you avoid nasty surprises. It can also help you choose between cards: just ask yourself which set of rates and fees you'd prefer if the introductory offers weren't available.
3. It takes time to get the card once you're approved
A new credit card typically takes 5–10 working days to arrive in the mail. But changes to Australia Post services in 2020 could mean it will take a little longer in the short term. On the bright side, most credit card support teams can give you updates on the process – just call the number listed on your application email (or their website).
Another positive: tech developments and digital wallets mean this waiting time is likely to be less painful in the future.
4. Balance transfers also take time
If you've racked up a holiday season credit card debt, you might be looking at credit cards with 0% p.a. balance transfer offers. These introductory deals give you a way to pay off debt and save on interest until the revert (or ongoing) rate kicks in.
While applying for a balance transfer is as simple as putting the details on your application form, the actual process of moving it typically takes between 5 and 14 days. But it can vary a lot, as it's up to your new credit card company to get all the details from you, contact your old card company and then authorise the transfer.
Sometimes you may need to activate your card before the balance transfer is processed, or wait for your new credit card company to contact you. If you factor this time into your plans for dealing with the debt, you can reduce the risk of a late payment on your old card – and work out a clear plan for paying down the debt once it's transferred.
5. You can update your payment options and account features in the future
If there's one lesson we've all learned in 2020, it's that circumstances change. In the case of a credit card, you might find that you use it differently over time.
When that's the case, some of the changes that are easy to make include:
• Requesting a change to your credit limit
• Setting up automated repayments (or cancelling them)
• Asking for support if you need it
It's also easier to cancel a new credit card now – since the start of 2019, credit card providers must give new customers the option of cancelling their card online. The same applies to requesting a credit limit decrease.
These measures are part of a wider set of credit card reforms designed to make it easier to manage your credit card accounts. But, more importantly, it means that if something isn't working for you anymore, it could be as simple as going online or calling your card company to find a solution.
6. Interest-free days are treated differently by each credit card company
Most credit cards offer "up to" a number of interest-free days in each (monthly) statement period. But when these interest-free days will or won't apply to your spending can be unclear – and varies between banks and other card companies. Here are the basics of how it works:
For purchases, if you pay the full balance on your credit card statement by the due date, you won't incur any interest charges.
If you don't pay your credit card balance by the due date, you will begin incurring interest. Usually, you won't be eligible for interest-free days for the next statement period either.
Most credit cards charge interest from the date a purchase is made, which means it builds up until you get your statement and see the full amount charged.
One exception to this is Bendigo Bank, which charges interest from the statement date. This means you're only charged interest on the total outstanding amount (not each purchase), which can save you interest compared to cards that calculate interest from the purchase date.
Another key detail to keep in mind: interest-free days only apply to purchases. So if you use your card for any cash advance transactions, they will attract interest straight away.
The bottom line here is that yes, interest-free days are pretty technical. But knowing how they work on your card can save you a lot of money in the long run.