Having trouble choosing the right credit card? You’re not alone! With so many options out there, it can be hard to narrow down your choices.
In this guide we'll go through some of the differences between no-frills and reward credit cards, and whether rewards cards are worth the hype.
When considering a credit card, it is important that you read and understand the terms and conditions of your prospective card, to determine whether its right for you.
What is a no-frills credit card?
No-frills credit cards are the most straightforward cards out there. While they don’t normally come with special offers or rewards, they make up for it with low fees and lower interest. Because of this, you may not need as high a credit score to open a no-frills card
Don’t let the fact that they’re simple fool you, as no-frill cards can still offer useful services such as the option to add your card to your digital wallet and allowing you to manage it online at any time.
Like rewards cards, no-frills cards can also be opened for either personal or business use, and some of them may even come with a few perks, like interest-free periods on your purchases as long as you pay your full balance each month.
What is a rewards credit card?
Rewards credit cards often come with special offers or a rewards program, which allows you to accumulate points and exchange them for rewards. These offers are normally part of the introductory period, which could be the first three months or first year you have your card. Offers could include a cashback period, a reduced annual fee in your first year, or a low interest rate on purchases in your first few months.
Different lenders may offer different types of reward systems. For example, you may be rewarded with discounts on your monthly grocery shop, or you may be able to exchange points for items and gifts.
However, rewards cards usually come with higher fees and higher interest rates compared to no-frills cards. Another consideration is that they reward regular and high spending, which can increase the risk that you’ll overspend and be unable to pay back your balance.
Are rewards cards worth it?
Rewards cards can be worth it, but it depends how you use them. In order to be eligible to receive points or rewards you often have to spend regularly and sometimes even in certain places. Couple this with the fact that annual fees can be expensive, with annual fees ranging from around $100 to over $300, a rewards card may not be worth the cost.
It’s important to keep in mind that a credit card shouldn’t encourage you to overspend, so be sure to choose a card that suits your spending and shopping habits.
If you’re looking to start building your credit or only need a card for emergencies or infrequent purchases, a no-frills card may be more your style.
As always, make sure you read the product terms and conditions to determine whether the card you are considering is right for you.
This article is intended to provide general information of an educational nature only. This information has been prepared without taking into account your objectives, financial situation or needs. Therefore, before acting on this information, you should consider its appropriateness having regard to these matters and the product terms and conditions. Terms, conditions, fees, charges and credit criteria apply. We do not recommend any third party products or services and we are not liable in relation to them. Any links to third party websites are for your information only and we do not endorse their content. Information in this article is current as at the date of publication.