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How to compare Christmas credit card promotions
Get more bang for your holiday buck with 0% purchases, bonus points or cashback this year with a Christmas credit card.
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If you're planning to use a credit card over the holiday season, you could get extra value from one that comes with an introductory 0% interest rate, bonus points or a cashback offer.
Want to know what's on offer right now? Here you can compare the latest credit card offers and get tips on what you need to think about to get the most value out of your new card this Christmas.
What perks do you want from a credit card this Christmas?
Compare credit cards with 0% purchase interest rate offers
These cards give you a way to shop interest-free for an introductory period. Make sure you look at both the offer and the standard rate when you're comparing cards.
If your spending usually skyrockets in the lead up to Christmas, a card that offers 0% p.a. interest on purchases for an introductory period could help you save on interest charges. The interest-free period offered typically lasts from 3 to 17 months, which could give yourself more breathing room to pay off your Christmas spending.
But if you're still paying off your shopping at the end of the introductory period, the card's standard purchase rate will apply to the balance. This rate is usually between 13% p.a. and 22% p.a, so it’s worth aiming to pay off what you've spent before interest charges kick in. You can use the credit card repayment calculator to help plan your payments, or divide your purchase balance by the number of months left in your interest-free period to see what you'd need to pay each month to clear the debt before interest applies.
If you want a long-term low interest option, you can also compare credit cards with ongoing low purchase rates to keep your interest repayments to a minimum. These cards generally have interest rates between 8.99% and 15%, which is low compared to most standard purchase rates. Another detail to note: both 0% purchase rate and low rate credit cards often charge annual fees, so factor this in when comparing your options.
How much can I save with a 0% purchase rate credit card?
The savings you can get from a 0% purchase rate offer depend on the length of the introductory period, how much you spend and whether you can pay it all off before the promotional period expires. To give you an idea, let's say you spend $1,000 at Christmas this year and plan to pay it off over a year. If you got a credit card that offered 0% on purchases for 12 months, you could save $170 on interest when compared to a card with a regular standard variable purchase interest rate of 17% p.a. Note that this example does not include any credit card annual fees or other charges.
Compare rewards credit cards with bonus points offers
Bonus point offers can give your rewards balance a big boost in the first few months you have the card. Check the spend requirement before you apply to make sure it fits with your Christmas shopping plans.
If you want to earn reward or frequent flyer points for your Christmas spending, you could get a head start by choosing a card that has thousands of bonus points up for grabs.
Usually, bonus point offers give you between 20,000 to 120,000 points when you meet a spend requirement (such as $3,000 in the first 90 days). With typical holiday season spending including gifts, travel and food, you should be able to find a card with a bonus points deal that fits with your budget.
As well as bonus points, you'll earn points for each $1 spent on eligible purchases, including for retail shopping, travel and dining. All the points you earn are added to your rewards or frequent flyer account, where you can redeem them for rewards such as travel, cashback and gift cards. But the types of rewards available do vary, so you may want to check out what options you have with different loyalty programs before choosing a card.
In terms of costs, rewards and frequent flyer credit cards usually charge higher annual fees and purchase interest rates than no frills cards, so they’re best suited to cardholders who plan to pay their balance in full each month. Otherwise the cost of interest can quickly outweigh the value of points and other perks.
How much value can I get from frequent flyer credit card bonus points?
While there is no fixed dollar value for reward points, frequent flyer cards and sign-up bonuses can provide hundreds or thousands of dollars worth of value. For example, the NAB Qantas Rewards Signature credit card currently offers up to 130,000 bonus Qantas Points in the first 12 months (100,000 bonus Qantas Points when you spend $3,000 on eligible purchases within 60 days of account opening and 30,000 when you’ve kept your card open for over 12 months). This card has a reduced $295 annual fee in the first year (reverting to $395 p.a. after that).
With 130,000 Qantas Points, you could get an economy return flight from Sydney to Los Angeles for one person, or two business class return flights from Melbourne to Perth. Based on our calculations, the retail value of these flights would be $1,503 and $2,400 respectively. So, even after subtracting the cost of the annual fee, both these reward options give you over $1,000 value.
Compare credit cards with cashback offers
With these offers, you can get cash back as a credit on your account, a gift card or money off when you shop at a partner store. Keep an eye out for the offer requirements when you're comparing cards.
If you prefer cash over points, you could look at credit cards that offer cashback. Similar to bonus point offers, with cashback you usually need to spend a set amount in the first few months to get the cashback.
If you’re paying with plastic over Christmas, getting a credit card that offers an account credit, gift card or other type of cashback for a fixed dollar amount could help you pay for what you need.
But many of these cards also come with annual fees and high interest rates, making them suited to cardholders who spend frequently and pay off their balance in full each statement period.
How much value can I get from a cashback credit card?
This depends on the cashback offer and the card's rates and fees. As an example, the Westpac Low Rate credit card offers $200 cashback when you apply by 31 March 2021 and spend $1,000 on eligible purchases in the first 90 days.
This card also has an annual fee of $59, which means you'd get $141 value from the cashback offer after factoring in the annual fee cost. Keep in mind that this example doesn't not including any potential interest charges if you carried a balance.
What should I consider when comparing credit card offers this Christmas?
Here are some points to consider before choosing a credit card for your Christmas shopping:
- Promotional period. Keep in mind that the 0% interest rate or rewards offer only applies during the introductory period. After that, the interest rate will revert to a higher standard rate, points will be earned at a standard rate per $1 spent and any reduced or waived annual fee deals will not apply. This usually means the card's costs will go up, so it's important to repay your debts and understand what fees are involved before this happens.
- Offer end date. Introductory offers only last for a limited time. For example, a card may offer 0% interest on purchases for 12 months if you apply by 31 December. When an offer end date like this is shown, you'll need to apply before that date to take advantage of it.
- Eligibility requirements. You need to be a minimum of 18 years of age and, depending on the card, you'll usually need to be an Australian citizen or permanent resident, have a good credit history and meet an income requirement. You can see this guide for a list of the eligibility requirements you can usually expect when applying for a credit card. Also keep in mind that some offers are only available to new customers who don't have existing credit cards with the same provider or brand.
- Eligible purchases. A 0% purchase rate, bonus points or cashback offer will usually only apply to “eligible purchases”. This typically includes everyday spending but excludes utility bills, gambling purchases, cash-equivalent transactions and balance transfers.
- Annual fee. Some credit cards offer competitive frequent flyer points bonuses, high reward earn rates and low interest fees, but charge proportionately (or disproportionately) high annual fees for them. It is good practice to work out if the fees for a card are worth the perks – and consider if those are perks you’ll even use in the first place.
- Points value. Getting a free return flight by simply signing up for a card and paying with it almost sounds too good to be true, and sometimes it really is. If you’re paying a high annual fee or high-interest rates for those points, they may not be worth it. So do your research on different rewards programs, think about how much you're likely to spend and decide if you will earn enough points for the card to be worth it when other costs are considered.
- Other features. Some credit cards offer other complimentary extras and perks. For example, if you travel frequently, you may want to look for a card that gives you complimentary travel insurance and low or 0% foreign transaction rates. Some cards offer purchase protection or extended warranties on your purchases, which might also appeal to you, while others have concierge services.
What about post-Christmas debt?
If you're worried about how you'll manage your credit card purchases once the Christmas decorations are packed away, you could consider a 0% balance transfer credit card. This gives you a way to move your debt (or consolidate a few debts) onto a card that offers no interest for a promotional period, which can last from 12 to 25 months. A balance transfer offer can give you time to pay off your existing debt and save money on interest charges but, just like 0% purchase rate offers, at the end of the introductory period a standard interest rate will be charged if you're still paying off the debt.
Bottom line? When choosing a new credit card around Christmas, make sure you compare your options carefully and consider both the promotional benefits and long-term features of each card. That way, you'll be able to find a card that works for your over the Christmas period and into the New Year.
Images: Shutterstock
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