Shopping addict? Here’s how to find your perfect credit card
These credit cards can help you get more bang for your buck when paying on plastic.
Are you a regular shopper? If so, you’ve almost certainly been tempted by a credit card before. Plus, the recent spate of end-of-financial-year sales probably isn't doing anything to help curb your desire to shop.
And there's nothing wrong with that. As long as you stick to a budget and make regular repayments, paying with plastic can come in handy on those retail therapy sessions.
There is no single best credit card for shopping. When choosing a card, you should look at your spending habits, financial situation and ability to repay to decide which one is right for you. To help you narrow down your options and simplify your comparison process, we’ve shortlisted some of the cards in finder's database of offers that are best suited to shopaholics.
If you're looking to take advantage of EOFY sales (and new financial year sales in July), check out the different types to find one that suits. We've also outlined the credit card traps you should watch out for and how you can get value from your card without falling into debt. Let's get shopping!
What are my credit card options for shopping?
Credit cards with no interest rate on purchases
If you know you need to splurge for an event, such as a birthday, Christmas or end-of-year sales, you might want to consider a credit card with a 0% purchase promotion. You can use the card to make purchases and then pay off your balance without accruing any interest while the promotion is in place. Not only can this help you save on interest costs, it can also help you pay off your purchases faster.
The offers available vary from card to card, but typically these interest-free promotions can last from 3 to 18 months. At the end of the promotional period, the 0% interest will revert to the standard purchase rate, which will be much higher.
Even with a 0% promotional purchase rate, you should still spend with a budget in mind. This way, you can calculate exactly how much you need to allocate each month to repay your shopping bills before the promotion ends. If you spend $3,000 on a card with 0% for 12 months, you would need to put $250 towards your account each statement period to repay the entire balance before the introductory offer finishes.
Credit cards linked to rewards and frequent flyer programs
If you’re a big spender, a rewards or frequent flyer credit card can reward you with points for every dollar you spend.
If you opt for a rewards credit card, you can earn points per $1 spent with the card issuer’s rewards program which you can redeem for cashback, gift cards and products (including fashion and beauty) from the online rewards store. Some rewards credit cards also have frequent flyer partners, allowing you to convert some of your credit card rewards to frequent flyer points.
If you’d prefer to turn all your purchases into flights and travel rewards, a credit card linked with a frequent flyer program could be just the ticket. Australian credit cards come linked with programs such as the Qantas and Virgin Australia Velocity loyalty schemes, so you can compare your options based on which airline you fly with the most.
Plus, many rewards and frequent flyer credit cards come with thousands of bonus points on sign up.
These cards usually come with high-interest rates and annual fees, so they’re better suited to cardholders who regularly pay their balance in full and can earn enough points to outweigh the costs of the card.
Credit cards with no foreign transaction fees
If you love to online shop with overseas merchants, a card with no foreign transaction fees could help you avoid the sting of extra costs when you spend in another currency. Standard credit cards charge a 3% foreign currency conversion fee when you spend in an international currency. If you shop online with international merchants frequently, this can quickly add up.
Credit cards with cashback
If you prefer cash over points, some credit cards come with cashback offers to reward you with credit to your account when you spend. Depending on the card, the cashback will either be a set amount or a percentage (such as 5% or 10%) of the purchase amount. There are usually spending thresholds and caps involved, which can limit your potential cashback return.
For example, your card may offer a $50 credit when you spend $750 within the first three months of approval. Alternatively, another product may come with 5% cashback on all retail purchases up to $1,000 within the first 90 days.
Credit cards with retail partners
If you’re super-loyal to particular shops, you should look for credit cards that are linked with retail partners.
For example, the David Jones credit cards from American Express allow you to earn points as you spend, boost your points balance with bonus points and offer shopping perks such as complimentary standard delivery, gift wrapping and invites to exclusive fashion events when you shop at David Jones.
American Express also regularly runs limited-time offers with retail partners, allowing cardholders to get cashback when they spend. Some previous deals have included $15 cashback when you spend $75 or more with Mimco, Country Road, Witchery, Rebel and David Jones on your Amex credit card.
What do I need to remember before I apply for a credit card?
A credit card can be a great way to free up your cash flow, but there are some traps to watch out for when you pay on plastic. While your credit limit can tempt you to spend, remember that you have to repay everything you spend (plus interest, in many cases). Many credit cards also come with annual fees, which can increase your total card costs. You need to weigh up whether the convenience of a line of credit outweighs the fees and interest rates that come with using a credit card.
You’ll also be required to meet eligibility requirements to get a credit card, so it’s important to ensure that you’re eligible and can afford the product before you apply. If you’ve already used a credit card to cover your retail costs and are struggling to repay your debt, you could always consider a 0% balance transfer credit card.
There are many Australian credit cards suited to retail shopping. However, the right one for you will largely depend on your spending habits and financial situations. Even if you are tempted to treat yo' self to some end of financial year goodies, remember that you have to repay everything you charge and certain cards may not suit you. So, make sure to compare your options before you apply and start shopping up a storm.
To get even more value for your money, check out our complete list of end of financial year deals with some of Australia's favourite retailers.
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