The benefits of a no frills credit card

Information verified correct on December 8th, 2016

Learn how a basic no frills credit card can help you manage your finances and minimise costs.

With the myriad credit cards boasting special features and complimentary extras on the Australian market, you must be wondering why anyone would go for a no frills credit card instead? Before you write them off, however, this guide will explain what a no frills credit card does, and how these low-cost options could benefit you.

What is a no frills credit card?

As its name suggests, a no frills credit card is a basic credit card offering a low interest rate or $0 annual fee, but with little or no additional features. The following types of no frills credit cards are commonly available:

Low interest rate credit cards

Low interest rate credit cards are credit cards designed to save you money otherwise lost to interest fees. With typical credit card purchase interest rates hovering around the 20% mark, low interest rate credit cards can save you a substantial amount of money by offering purchase interest rates in the 10% region. Some card promotions even bring that down to 0%, albeit only for a promotional period of X number of months (usually between 6 and 15). Since these cards come with limited extra features, their annual fees are also moderate to low and you can sometimes even find one or two $0 annual fee low interest rate credit cards. These cards are best suited for cardholders who regularly use their cards but who take a while to settle their balances, since these present the greatest interest savings and repayment flexibility.

No annual fee credit cards

No annual fee credit cards offer administrative savings on your credit card, either for the life of the card, for the first year or two only, or sometimes when you meet a specified spending requirement. No annual fee cards exist across the spectrum of different credit card types, including balance transfer, rewards, frequent flyer credit cards and travel cards that offer zero annual fees. No annual fee cards are most suitable if you rarely use your credit card and paying an annual fee for it would not be worthwhile. This kind of card is probably not appropriate if you wish to carry a balance because the purchase interest rates tend to be higher to offset the lack of an annual fee.

Low credit limit credit cards

Low credit limit credit cards are exactly that, credit cards with lower credit limits. While this may seem counter-intuitive at first (isn’t bigger always better?), the virtues of a low credit limit can go a long way. Firstly, it can eliminate the temptation to overspend, which a high credit limit often deviously encourages. Secondly, it could improve your credit score if you spend well under your credit limit. Thirdly, it would improve your chances of getting that credit card application approved if you have a low income. Finally, it can be the one thing that saves you from falling into a credit card debt trap.

The pros and cons of a no frills credit card

Pros

  • Cheaper to maintain. You will be saving money immediately with low or no annual fees, since credit card annual fees can be tens to hundreds or thousands of dollars
  • Lower interest fees. Interest fees can represent the largest cost when it comes to credit cards, so having a card with low or no interest fees can translate into substantial cost savings.
  • Less temptation to spend. Having a lower credit limit will ensure you spend less, and also having a no frills card means that you won’t be tempted to spend unnecessarily for the promise of earning points.
  • Less possible debt. If you have a lower credit limit and interest rate on purchases, you’re more likely to be able to repay your balance in full and avoid falling into debt.

Cons

  • Less interest-free days. No annual fee cards can sometimes skimp on the typical 55 interest-free days offering. This could pose a problem if you sometimes repay your balance in full and look forward to the reward of more interest-free days.
  • Limited extra features. If you’re after the complimentary insurance treats and rewards perks that rewards credit cards offer, a no frills credit card might fall short.
  • Less value for money. Depending on what sort of spender and cardholder type you are, you may find that no frills cards offer less value for money in terms of features and privileges. If you are a big spender and frequent traveller who always pays off your monthly account balance in full, you’ll probably get more value from using a frequent flyer credit card even if you’re paying more in annual fees for it.
  • Less available credit. A lower credit card limit may become a problem in times of emergency or when you occasionally need to make a large purchase.

No frills credit cards can be beneficial and cost-efficient for some people, but will not be suitable for everyone. As always, we recommend that you research and discover all the available credit card options out there before deciding on the one that will best serve your personal needs and spending habits.

Compare No Annual Fee Credit Cards

Rates last updated December 8th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
14.99% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
ME Bank frank Credit Card
A low interest rate on purchases and cash advances with $0 annual fee for the life of the card.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info
ANZ Frequent Flyer Black
Earn 75,000 bonus Qantas Points when you spend $2,500 on eligible purchases within the first 3 months plus enjoy $0 annual fee for the first year. Also, receive complimentary airport lounge access and 24/7 concierge service.
19.99% p.a. $0 p.a. annual fee for the first year ($425 p.a. thereafter) Go to site More info
ANZ Platinum Credit Card - Exclusive Offer
Receive a low introductory offer of 0% p.a. on purchases for 3 months and 0% p.a. on balance transfers for 12 months. Also, enjoy an annual fee waiver in the first year.
0% p.a. for 3 months (reverts to 19.74% p.a.) 0% p.a. for 12 months $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
Virgin No Annual Fee Credit Card
No annual fee credit card with $100 cashback and a long term low rate balance transfer offer of 0% p.a. for 18 months with 2% balance transfer fee. Spend criteria applies for cashback offer.
18.99% p.a. 0% p.a. for 18 months with 2% balance transfer fee $0 p.a. Go to site More info
American Express Qantas Discovery Card
Earn up to 7,500 bonus Qantas Frequent Flyer points, plus take advantage of no annual fee for the life of the card. Earn 1 Qantas Frequent Flyer point per $1 spend.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
ANZ Platinum Credit Card
Enjoy platinum card benefits with $0 annual fee in the first year and complimentary overseas travel and medical insurance.
19.74% p.a. 0% p.a. for 18 months with 3% balance transfer fee $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
28 Degrees Platinum MasterCard
No annual fee for life, up to 55 days interest-free on purchases and no foreign transaction fees.
21.99% p.a. 4.99% p.a. for 6 months $0 p.a. Go to site More info
American Express Velocity Escape Card
Enjoy 7,500 bonus Velocity Points when you meet the minimum spend requirement and earn up to 2 points for every $1 you spend, together with a $0 annual fee.
20.74% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
Was this content helpful to you? No  Yes

Related Posts

American Express Essential Credit Card
American Express Essential Credit Card

Interest rate

14.99

Annual fee

0
ME Bank frank Credit Card
ME Bank frank Credit Card

Interest rate

11.99

Annual fee

0
HSBC Platinum Credit Card
HSBC Platinum Credit Card

Interest rate

19.99

Annual fee

149

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback