Should you switch credit cards in 2021?

Want to earn rewards, save on fees or pay off your credit card debt in the New Year? Here's the lowdown on choosing between your current credit card and a new one.

This guide is written in partnership with the Coles No Annual Fee Mastercard. When you apply for the Coles No Annual Fee Mastercard by 31 March 2021, you will get 0% p.a. for the first 12 months on both purchases and Balance Transfers. This card comes linked to Flybuys rewards, which means you can also enjoy $10 at the checkout when you redeem 2,000 points. Product issuer and credit provider Citigroup Pty Ltd Australian Credit Licence 238098. T&Cs apply. Learn more.

As well as making resolutions to exercise more, eat healthier and kick bad habits to the kerb, the start of the year is a time when many of us look at our money plans. If you've got a credit card, this is an opportunity to check if it's working for you or if you're working hard to pay it off.

A simple way to do this is to take a look at how much interest you're paying, the annual fee and the other features you get with the card. If these all seem manageable to you, then you could carry on with the same card.

But if you've got a debt-hangover from 2020 or want to get more bang for your buck, here are three key factors that will help you find a card that fits with your New Year's goals.

1. Introductory offers

Designed to sweeten the deal when you first sign up, introductory offers give you a way to save on interest, earn more rewards or enjoy other short-term benefits.

To make the most of these offers, think about what your main goal is and the benefit that fits with it. The main types of offers you'll see include the following:

• 0% p.a. interest rates for balance transfers. These offers help you save on interest when you move your credit card debt to a new card. The 0% p.a. rate is typically in place for the first 6-26 months before changing to a higher rate and won't apply to new purchases.
• 0% p.a. interest rates for purchases. If you have a lot of spending to do, you can shop interest-free during the introductory period with this type of offer. As a guide, most 0% p.a. purchase rates last for between 3 and 12 months.
• Bonus points. If you want to upgrade your lifestyle with travel benefits or other rewards, introductory bonus points can help you get there faster. Most of these offers have a spend requirement you need to meet in the first few months (e.g. $3,000 on eligible purchases in the first 3 months).
• Cashback or gift cards. A growing trend is to offer people cashback in the form of account credits, gift cards or money to shop with a partnered brand. Similar to bonus points, there's often a spend requirement, but these offers make it easy to see the dollar value (and how it fits with the card's costs).
• Reduced or waived annual fees. These offers help you save on upfront costs when you first get a card by discounting or waiving the card's annual fee – usually for the first year. But after that time, an ongoing annual fee kicks in, so the value really is limited to when you first get the card.

What if you want more than one of these offers?

Plenty of cards have a mix of introductory offers to appeal to different people and goals. If you know what you want, you can cherry-pick the ones that work for you – just as you would sort through sale items in a shop.

As an example, the Coles No Annual Fee Mastercard currently offers 0% p.a. on purchases and 0% p.a. on balance transfers for the first 12 months.

So, if you wanted to pay off your credit card debt but also needed to make a big-ticket purchase, this offer gives you a way to save on interest for both. You could also use it for just one of these goals.

Either way, the key would be to pay off what you owe in the first 12 months to avoid interest charges. To plan for that date, you can work out repayments using a credit card calculator, or divide the amount owed by the number of months you get the 0% p.a. rate.

2. Ongoing rates and fees

These features have a long-term impact and can cost you money well after any introductory period has ended. The following are three of the biggest ones to look at:

• The annual fee
• The interest rate for purchases
• The interest rate for balance transfers (also known as the revert rate)

Checking these factors when you're comparing cards will help you find one that offers value beyond the introductory period. It's also good to check how they match up to the features on your existing card so you can make sure switching is worth it.

One other feature to consider is interest-free days on purchases. Most cards offer up to a set number of days interest-free for each statement period, even after introductory offers have ended. But, with many cards, you'll only get interest-free days if you pay off your full balance by the due date on each statement – including any balance transfer debt.

So if you still have a balance transfer or want the flexibility to only pay off part of what you owe each month, be aware that you probably won't get interest-free days. And that could make getting a lower interest rate even more important.

3. Rewards

These features can help you get more value from a credit card that you regularly use. Most rewards cards offer points per $1 spent on your everyday spending, which you can use for flights, upgrades, cashback or retail items like coffee machines and jewellery.

The biggest catch with rewards credit cards is they often have higher annual fees than other cards. So you'll need to decide if the value you get from the rewards is worth this cost or look at rewards cards that have no annual fee.

Just keep in mind that rewards cards with $0 annual fees for life usually earn fewer points per $1 spent than those with fees.

As an example, the Coles No Annual Fee Mastercard offers 1 Flybuys point per $2 spent on eligible purchases and doesn't charge an annual fee ever. In comparison, the Coles Rewards Mastercard offers 2 Flybuys points per $1 spent on eligible purchases for the first $3,000 in a statement period and 1 point per $1 spent after that. It also has a $99 annual fee (currently waived for the first year).

When you're comparing rewards cards with and without annual fees, think about whether you want to earn some points and never think about an annual fee or earn more points and pay an annual fee.

There are so many credit cards on the market and all of them have a different mix of features. But if you start by looking at your own goals, you can find one that fits with them.

Featured Coles credit cards

Name	Purchase rate p.a.	Annual fee	Balance transfer rate p.a.	Amount Saved
Coles No Annual Fee Mastercard Flybuys	Purchase rate p.a. 0% for 6 months, then 19.99%	Annual fee $0	Balance transfer rate p.a. 19.99%		Go to siteMore Info Compare	Get 20,000 bonus Flybuys points (worth $100 Flybuys Dollars) and 0% interest on purchases for the first 6 months.
Coles Rewards Mastercard Flybuys	Purchase rate p.a. 19.99%	Annual fee $99	Balance transfer rate p.a. 0% for 6 months, then 19.99%	Amount Saved $384.02 over 6 months	More Info Compare	Get 75,000 bonus Flybuys points (worth $375 Flybuys Dollars) and 0% international transaction fees on purchases.
Coles Low Rate Mastercard Flybuys	Purchase rate p.a. 12.99%	Annual fee $58	Balance transfer rate p.a. 0% for 15 months with 1.5% balance transfer fee, then 19.99%	Amount Saved $1,019.92 over 15 months	More Info Compare	Save with 0% p.a. for 15 months on balance transfers (with a 1.5% BT fee). Plus, earn Flybuys points on Coles spending.

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