Shop securely and save on extra fees when using a credit card to shop online.
Paying on plastic can be a convenient way to secure purchases online, but there are some cards that are better to use than others. Depending on how you shop online, you should make sure that the card you're using protects you against any potential fraudulent transactions, doesn't charge extra fees for overseas purchases and can help you cut down on interest costs. If you're looking for a credit card to use online, you can use this guide to discover what to look out for and compare your options side by side.
Compare credit cards for online shopping
How to compare credit cards for online shopping
- No currency conversion fees. If you often make purchases from online merchants that are based overseas, you should consider a credit card that doesn't charge a currency conversion or foreign transaction fee. Usually sitting between 3% and 5% of your transaction amount, these fees could quickly add up if you're using your credit card to shop online. If the currency conversion fee was 3%, this means that a USD$500 purchases could add an additional AUD$16.10 to your overall cost. So a card with 0% foreign transaction fees could help cut these costs.
- Low or 0% interest fees. If you're using your card for purchases but struggle to repay your balance in full each month, you might want to consider a card with a low ongoing interest rate or a promotional 0% offer on purchases. Currently, you can compare credit cards with 0% on purchases for up to 15 months or cards, but it's important to remember that these revert to the much higher standard purchase rate when the offer ends. Otherwise, you could consider a card with a low ongoing rate between 9% and 15% for the life of the card. If you regularly pay your balance in full, you could also benefit from a card with an interest-free days offer.
- A rewards card with a high earn rate. If you're regularly spending online and usually pay your balance in full, a rewards credit card could help you earn points from every dollar you spend on eligible purchases. While most reward or frequent flyer credit cards award 1 point per $1 spent, some offer a higher earn rate on overseas purchases, which could come in handy if you're using your card to shop at foreign merchants online.
- Fraud protection. Today, it's standard for credit cards to have protection in place to guard you against scammers and fraudsters, but you can do your part too by opting for a card that is linked to Verified by Visa or MasterCard Protection. It's important to note that most insurances, such as Purchase Protection and Extended Warranty, don't apply to items bought online.
Which credit card should Queenie use to shop online?
Queenie is deciding whether to buy a Kindle Fire HD for $214 from Amazon (overseas) or eBay Australia for $219 (within Australia). She wonders if the difference in fees and rewards are worth buying from overseas or internationally.
|Qantas American Express Ultimate Credit Card||HSBC Qantas Platinum Credit Card||Bankwest Qantas Platinum Mastercard||Citibank Select credit card|
|Foreign transaction fee||$6.42 (3% foreign transaction fee)||$6.42 (3% foreign transaction fee)||$0 (0% foreign transaction fee)||$7.17 (3.35% foreign transaction fee, average between AMEX and MC)|
|Rewards points earned if purchased overseas||428||428||214||1070|
|Monetary value of points if purchased overseas||$3.17||$2.18||$0.88||$5.35|
|Rewards points earned if purchased in Australia||219||219||219||428|
|Monetary value of points if purchased in Australia||$1.62||$1.11||$0.90||$2.14|
Note: The information listed above are based on the products' details as of September 29, 2015.
Which credit card is better for overseas online purchases?
From the table, you can see that if Queenie used the Qantas American Express Ultimate, Citibank Select or HSBC Qantas Platinum credit card, it may have been cheaper to buy the product within Australia as the foreign transaction fee is more than the price difference. However, the Citibank Select credit card would have returned more value in rewards, in comparison to the $5 difference. In the end, if Queenie bought her Kindle Fire HD from Amazon the Bankwest Qantas Platinum Mastercard may have provided the most value for her purchase. As well as no foreign transaction fee, it also returned reward points. This example is based on the fact that shipping prices would be similar.
Even if you are getting cheaper deals online, you need to consider how the currency conversion fees and reward points impact the total value of the purchase.
Compare credit cards for online shopping
The benefits and downsides of using a credit card for online shopping
- Avoid currency conversion fees. If you get a credit card with no or low currency conversion fees, you can make significant savings while making purchases with overseas retailers.
- Earn while you spend. If your credit card comes with a rewards system, you can earn points as you spend. These points can be redeemed for cash back on your account, travel rewards and merchandise and products from the rewards program online store.
- Wide acceptance and protection. If your credit card is linked to one of the larger providers, such as Visa or MasterCard, you can make purchases internationally. These networks often come with additional security, such as Verified by Visa or MasterCard Protection, giving you an extra layer of protection when shopping online.
- Accumulating debt. Unlike a debit card or a prepaid travel card, a credit card is not linked to your own funds. So if you're an impulsive or frequenter spender, using your credit card for online purchases could quickly build up debt on your card. If you struggle to repay your balance in full, make sure to consider a card with low or no interest on purchases.
- Security risks. While credit card security measures are in place to protect your finances against fraud or theft, no online purchase is entirely risk-free. Always research the site the legitimacy and security of the site before making a purchase.
- Foreign fees. If your card doesn't offer either a low or no currency conversion fee, your spending can increase significantly when making a purchase in a foreign currency.
Alternatives to credit cards: Use a travel card to shop online
If you don't want to use a credit card but want a secure way to make purchases online that isn't tied to your savings account, consider a prepaid travel money card. You can load these cards with funds and use them to make purchases in several foreign currencies. Not only will this save you from currency conversion fees if you're making a purchase in a supported and loaded currency, it's also a good way to spend according to a budget. You can only spend the amount that's loaded on the card and will need to reload more funds if your balance runs low.
As these cards are usually Mastercard or Visa products, you can use them both online and in-store at millions of locations around the world.
Frequently asked questions about using a credit card to shop online
What is the difference between a travel card and a credit card?
Travel cards are generally prepaid cards that allow you to load funds from directly from your account to use to make purchases in multiple currencies. On the other hand, a credit card is not loaded with prepaid funds and comes with a credit limit instead. The credit limit will usually vary depending on your credit card, provider and your ability to pay it back.
What are the most widely accepted credit cards?
The most widely accepted credit cards are MasterCard and Visa. Most websites will provide a list of acceptable payment options, so make sure to read over this before committing to a purchase.
Can I use my credit card with PayPal?
Paypal can offer additional security when making online purchases and some sites only accepted payments through PayPal. You can link your credit card to your PayPal account through your online PayPal account portal.