The benefits of a no frills credit card

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.

Compare No Annual Fee Credit Cards

Rates last updated November 19th, 2017
Name Product Annual fee Purchase rate (p.a.) Balance transfer rate (p.a.) Product Description
American Express Essential Credit Card
$0 p.a.
14.99% p.a.
0% p.a. for 12 months with 3% balance transfer fee
Get Smartphone Screen Insurance of up to $500 when you pay for your phone or contract with your Essential Credit Card.
St.George Vertigo Platinum - Online Offer
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
12.74% p.a.
0% p.a. for 24 months
Platinum card benefits plus 0% p.a. for 24 months on balance transfers (with no BT fee) and $0 annual fee in the first year. Ends 13 December 2017.
ANZ Platinum Credit Card - Exclusive Offer
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
0% p.a. for 3 months (reverts to 19.74% p.a.)
0% p.a. for 12 months
Pay 0% p.a. for 3 months on purchases and receive platinum perks including complimentary travel and purchase insurance.
Woolworths Everyday Platinum Credit Card
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
19.99% p.a.
0% p.a. for 14 months
Receive a $50 eGift Card when you apply by 31 January 2018 and make an eligible purchase by 28 February 2018.
Qantas American Express Discovery Card
$0 p.a.
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
Earn an uncapped 1 Qantas Frequent Flyer point per $1 spent, plus complimentary purchase insurance.
Citi Simplicity Card
$0 p.a.
19.99% p.a.
0% p.a. for 15 months with 1.5% balance transfer fee
Earn 5% cashback on eligible purchases (capped at $50 per month) for the first 90 days from card approval.
St.George Vertigo Visa - Online Offer
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
13.24% p.a.
0% p.a. for 18 months
Take advantage of 0% p.a. for 18 months on balance transfers (with no BT fee). Plus, $0 annual fee in the first year. Ends 13 December 2017.
ANZ Rewards Platinum
$0 p.a. annual fee for the first year ($95 p.a. thereafter)
18.79% p.a.
Receive 65,000 bonus Reward Points when you spend $2,500 within the first 3 months from card approval.
American Express Velocity Escape Card
$0 p.a.
20.74% p.a.
0% p.a. for 12 months with 1% balance transfer fee
Earn uncapped Velocity points on purchases and redeem for a range of rewards including flights, accommodation, car hire and gift cards.
Bankwest Zero Platinum Mastercard
$0 p.a.
17.99% p.a.
2.99% p.a. for 9 months
Receive complimentary international travel insurance, access to a 24/7 concierge service and 0% foreign transaction fees.
Greater Bank Visa Credit Card
$40 p.a.
11.95% p.a.
Same low 11.95% p.a. interest rate on purchases and cash advances, plus, up to 55 interest-free days on purchases.
ANZ Frequent Flyer Black
$0 p.a. annual fee for the first year ($425 p.a. thereafter)
19.99% p.a.
Receive 75,000 bonus Qantas Points when you apply online, are approved and spend $2,500 on eligible purchases in the first 3 months.
Westpac 55 Day Platinum Credit Card
$0 p.a. annual fee for the first year ($90 p.a. thereafter)
19.84% p.a.
0% p.a. for 20 months with 2% balance transfer fee
Receive up to 55 days interest-free on purchases, platinum concierge service and extended complimentary insurance cover.
Bankwest Zero Mastercard
$0 p.a.
17.99% p.a.
2.99% p.a. for 9 months
Receive up to 55 days interest-free on purchases, the worldwide acceptance of a Mastercard and the ability to use Android Pay.

Compare up to 4 providers

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.

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