Better off with a low-rate credit card 'unless settling in full each month'

Individuals should check to make sure credit card perks outweigh what is being paid on them

, according to one industry expert.

People would be better off with a low-rate credit card unless they are going to pay off their debt in full every month.

This is according to Paul Clitheroe, founding director of financial planning firm ipac and chairman of the Australian Government Financial Literacy Board, writing a piece for Coolum & North Shore News.

He proclaimed two of the cheapest credit cards on the market to be Aussie MasterCard charging 9.99 per cent and MECU's Low Rate Visa with a rate of 10.49 per cent.

In addition, Mr Clitheroe noted that some financial organisations - such as HSBC, BankSA and St George - offer so-called instant rewards and discounts, although he advised individuals to make sure that advantages are outweighing the cost of the card for the type of spending and repayment pattern.

He added: "The general rule with card rewards is that you need to spend a lot on the card and have no ongoing card debt for the rewards to be worthwhile. Even then, you still need to shop around for a card with a low annual fee."

What's more, the founding director cited recent research from Citibank, which revealed that around 65 per cent of people down under have an Aussie credit cards linked to a rewards scheme.

And he noted that, despite being in favour of these types of schemes, the desire for freebies "can be taken to extremes".

This may include those who have an average credit card debt of $3,000, which then results in interest of $600 annually and on top of that there is a card fee to be paid every year, leaving Mr Clitheroe to conclude: "Its hard to see how reward points offer significant value if you have an outstanding card balance".

These comments come after head of credit cards for Citibank Madeline O'Connor recently observed, in response of the financial company's survey, that people are missing out on savings that could total hundreds of dollars.

Better off with a low-rate credit card 'unless settling in full each month'

By: Sam Gooch

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