Congratulations to TSB, the winner of Canstar’s Bank of the Year Credit Cards Award for the fourth year in a row.
TSB: Bank of the Year Credit CardsOnce again our research shows that TSB leads the field in low-rate and rewards cards, plus the bank earned great feedback in our consumer satisfaction survey, encompassing over 3000 credit card users, across features including customer service, fees and online banking.
TSB’s low rate card: TSB offers the lowest purchase interest rate in the market (11.95% p.a.), and leads in card features thanks to digital wallets and Apple and Google Pay.
TSB’s rewards card: TSB’s Platinum Mastercard delivers a competitive cashback of $1 for every $100 spent on eligible purchases, for an annual fee of $90.
Our 5-Star winning credit cards deliver true value, whether you’re looking for a card with a low rate of interest, or one that offers great rewards, whatever your annual credit card spend.
Credit cards from three banks earn our 5-Star Outstanding Value Awards for their low-rate cards:
The following rewards credit cards earn 5-Star Outstanding Value Awards across different annual-spend levels:
The following flight rewards credit cards earn 5-Star Outstanding Value Awards across different annual spends. And as you can see, it’s Amex that dominates:
Canstar uses a sophisticated and unique Star Ratings methodology to compare credit cards. We compare a wide range of credit card products in New Zealand across the following categories: low cost, rewards and frequent flyer cards. Our Star Ratings methodology considers a range of characteristics, such as:
Credit cards are given a rating from one to five stars in each category, with 5-Star Awards given to products in the top 10% of eligible products on our database.
High credit limits – blessing or curse?
Many rewards cards have a high minimum credit card limit, and while this might not bother some people, anyone who has difficulty sticking to a budget might find this extra credit limit a temptation to spend. A high credit card limit can also reduce the amount you can borrow for other loans, such as a mortgage.
Be wary of sign-up perks
Some credit cards offer perks for taking out a new card, such as bonus rewards points or low- or no-interest periods. While some credit card gamers will hop from card to card to maximise these points, this kind of sport is not for the faint-hearted. If you don’t pay off and close your old card, you could end up paying multiple annual fees or interest on more than one debt. Applying for several cards in a short space of time can also damage your credit score.
Not all rewards points are created equal
Are you a big spender who pays off the whole balance every month? If yes, then you might be able to get bang for buck out of a rewards card – the stuff that turns your everyday spending into something a bit more exciting. Maybe you’re a frequent flyer? A card that includes travel insurance could work in your favour. However, these cards often come with higher fees and interest rates, so you need to chose your card carefully.
If you don’t pay off your credit card each month and regularly incur interest charges, a low-interest credit card could be better suited to your needs.
Remember, a credit card is a tool, not free money. Use it wisely, and it can be an asset. Use it carelessly, and it can become a financial burden.
A credit card allows you to borrow money from a bank or financial institution to make purchases and other kinds of payments. A credit card gives you access to a revolving line of credit. That means you can access money as needed up to a specified limit, called your credit limit. You will then need to repay any money you access, along with any interest, fees and other charges.
If you pay off your balance in full by the due date each month, you typically won’t pay interest on your purchases. If you only repay your balance in part, you will typically be charged interest. You may also be charged fees, including annual or monthly fees, late payment fees, cash advance fees and international transaction fees.
Credit cards can be risky. They typically charge higher interest rates than other forms of credit, such as personal loans, and you could also damage your credit score if you don’t make your repayments on time.
But if used responsibly, credit cards may be useful – for example, if you need access to funds in an emergency. Some credit cards may also offer perks such as complimentary insurance or frequent flyer points.
There is a range of different types of credit cards available on the market:
Low rate credit cards
As the name suggests, a low rate credit card generally comes with a lower interest than other types of credit cards. These cards are usually no frills, meaning they may not offer some of the perks that other credit cards do, such as complimentary insurance or the ability to earn rewards points when you spend money using the card. Generally these cards may be suited to people who carry a balance on their credit card from month to month and are therefore charged interest by the lender.
While a low rate card may save you money on interest compared to other credit cards if you carry a balance from month to month, you may still be charged an annual fee and other fees depending on how you use the card.
No annual fee credit cards
No annual fee credit cards are usually relatively basic cards which, due to the pared-back set of features on offer, do not charge an annual card fee. Avoiding an annual fee can save some credit card holders hundreds of dollars per year, but the drawback is you may not have access to a rewards scheme or other benefits that more premium (and more expensive) cards offer. Bear in mind, too, that while there may not be an annual fee, other fees may apply. These can include cash advance fees, for withdrawing cash, and currency conversion fees, if you use the card to pay for goods or services overseas.
A no annual fee credit card may be appealing to people who only have a credit card for emergencies and use it sparingly.
Rewards credit cards
Rewards credit cards are generally more premium products than low rate or no annual fee credit cards, but tend to be more expensive due to the higher fees and rates of interest typically charged. However, some people are prepared to pay the higher fee and potentially incur a higher rate of interest in return for the rewards on offer with this kind of card. For example, cardholders may have access to a rewards scheme that enables them to earn points for every dollar they spend using the card. Rewards cards can also come with other benefits such as complimentary insurances, including purchase protection insurance and travel insurance if you book a trip using the card.
It’s important to carefully consider your spending habits with these kinds of cards and whether the benefits are worth it when the costs are factored in. It’s also important to take care that the appeal of earning points and other rewards does not cause you to overspend and rack up debt. Because of the high rate of interest that rewards cards tend to charge, they are typically better suited to people who pay off their card balance in full every month.
Frequent flyer credit cards
Frequent flyer credit cards also offer rewards and other perks to cardholders, but these benefits are generally linked to an airline’s rewards program, such as Air New Zealand’s Airpoints. There may also be travel related perks for cardholders, like complimentary passes to airport lounges and travel insurance.
Like rewards credit cards, frequent flyer cards tend to charge higher annual fees and higher interest rates than low fee and low rate cards. It’s important to bear this in mind, as well as the temptation to overspend in order to maximise points earned, before deciding if a frequent flyer credit card is right for you.
Premium and platinum credit cards
Premium and platinum credit cards are generally the cards that come with the most valuable perks and earn rates on rewards points. They are also typically the most expensive, particularly when it comes to their annual fees, which in some cases can be several hundreds dollars. Some lenders only offer their most premium cards to applicants with very high incomes.
Balance transfer credit cards
A balance transfer credit card is one that enables the card holder to transfer the balance of another credit card they have (or multiple cards) to the new card. Many balance transfer credit cards allow new customers to get a 0% interest rate on that transferred debt for a period of time.
The aim for the cardholder is to enable them to pay down the debt faster than they otherwise would if they were being charged interest. The length of the 0% interest rate on the transferred balance can vary but the important thing to remember is that the 0% interest rate typically only applies to the original balance that was transferred to the card.
If you make new purchases, these amounts will be subject to interest, potentially at a high rate relative to other kinds of credit cards that are available. The interest rate that applies once the 0% rate period has finished can also be high. Many credit card providers offer balance transfer deals to new card customers.
Then there’s the question of which payment platform to choose, such as Mastercard or Visa. What card your lender offers you depends on the payment network it’s partnered with, which could include:
Depending on how you use your credit card, they can be an expensive way to access funds, but some of the fees are avoidable. Here are some of the common credit card fees that may apply depending on the card you choose:
It’s important to consider your circumstances when choosing which type of credit card is right for you, including:
If you’re already struggling with debt, or aren’t sure if you’ll be able to afford to pay off your credit card balance each month, it may be worth reconsidering whether a credit card is the right option for you.
How much your credit card ends up costing you can depend on a few different factors. The interest rate a card charges on purchases and other transactions is one potential cost, particularly if you don’t pay off the card balance in full each month.
Generally, the lower the interest rate and the smaller your outstanding balance, the less the card will cost you in interest. The card’s annual fee can also play a part. A card with a low or no annual fee can help reduce the ongoing cost, although these cards may not come with as many features or perks as cards with higher fees.
If you’re looking at cheap credit cards, you might also want to weigh up the features on offer. For example, a card with a high number of interest-free days could help you avoid or reduce the amount of interest you pay on purchases.
Ultimately, while the cheap credit cards on the market may be tempting, simply using your card responsibly can be the most effective way to use a credit card without incurring too many unnecessary costs. This could include taking steps such as setting an appropriate credit limit, avoiding unnecessary spending where possible and ensuring you don’t carry over debt from month to month.
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Banking & Insurance - August 14th
A credit card is a great financial tool. If used wisely it can help smooth cashflow, and rewards cards can provide great cashbacks, flights and other freebies. However, some cards do come with high interest rates,…
– Read moreWhat credit card is right for you?
Wondering what type of credit card you should get? This depends on what type of spender you are.
It comes down to two questions:
What type of credit card spender are you?
Canstar has identified four main types of credit card spender:
These cards are suited to someone who uses their credit card frequently every month, but struggles to pay it off in full. For example, the cardholder would typically spend $14,000 a year, while constantly revolving debt of $9,000 on their credit card.
If this sounds familiar, you should consider looking for cards with a low interest rate and a low annual fee. Rewards cards may not suit you as they usually have high monthly interest rates and large annual fees attached.
An Everyday Spender is someone who uses their card frequently every month, but is able to pay off the card in full each month.
With the Everyday Spender, it doesn’t matter what interest rate you get, since you don’t plan to pay interest! You might want to look for the maximum number of interest-free days, since the Everyday Spender tends to hold back on repaying until the eleventh hour.
Depending on your overall spend per year, it may also be worth looking into a few rewards offerings and other features – as long as the benefits outweigh the cost.
An Occasional Spender is someone who keeps a credit card in reserve for big ticket items, such as holidays, or in case of emergencies, and then pays off the balance over a few months.
You might want to check out the selection of cards with a low ongoing interest rate and a low, or no, fee.
Finding a credit card that works for you, not against you, is easy if you carefully examine what you spend and how you spend it. Interest-free days aren’t really going to benefit you all that much if you are carrying a balance over several bills.
Someone who spends a lot on their card, routinely puts around $5000 or more through their card per month, and always pays in full before interest is charged.
The interest rate is no problem if you’re paying it off before interest is charged, so you can look for a card with no annual fee and/or a great rewards and services program. You usually won’t get both, but if you use your card a lot, you may as well make it work for you.
Cards aimed at big spenders can have a high annual fee and high interest rates, so a few missed payments can write off any rewards you received. Make sure you pay it off like clockwork!
Please note that these are a general explanation of the meaning of terms used in relation to credit card rewards. Your bank or financial institution may use different terms, and you should read the terms and conditions of your credit card carefully to understand all rewards, features, fees and charges, and interest rates that may apply to your card.
Annual fee / annualised fee: charged for administration of your line of credit. Annual fees vary – some credit cards don’t charge an annual fee, while the American Express Platinum Card has an annual fee of a substantial $1250.
Automatic transfer: a system where a bill is paid by one bank automatically transferring money into an account when the bill comes due. Also known as direct debit.
Auto-redemption: a system you can set up with your provider where every time you reach a certain number of points, they are automatically redeemed in the method of your choice.
Average daily balance: the average daily balance of your card is determined by adding up all balances during the month and dividing the total sum by the number of days in the month. With most lenders, the annual interest rate is then applied to that “daily” amount.
Balance transfer: transferring the outstanding balance of one credit card to another card, usually one with a better (lower) rate.
Balance transfer fee: Fee charged when you make a balance transfer. It may be a flat fee or a percentage of the amount you transfer.
Bankruptcy: This is when someone’s debt problems become so serious that they are unable to pay their existing debts and bills. They can apply to a court to be declared bankrupt, and any assets or savings they have can be used to pay off their debts. They can then wait a certain time period to have that bankruptcy removed from their record, or apply for it to be removed earlier.
Big spender: credit card users who spend a lot on their cards every month and always pay off the full balance. Rewards credit cards are useful for these cardholders because they spend enough to earn a significant amount of rewards points.
Cash advance: withdrawing cash from a line of credit. Usually incurs a cash advance fee and/or a higher interest rate.
Cash advance fee: Fee charged when you use your credit card to get cash out from an ATM, buy foreign currency, buy travelers cheques, or pay a gambling debt. The fee can be a flat dollar amount or a percentage of the amount withdrawn.
Caveat emptor: Latin for “let the buyer beware”. In financial situations, this phrase means that a buyer should be careful to examine a product’s terms and conditions, before signing up for the product.
Credit limit: the maximum amount you can spend using your credit card before having to pay off some of the balance.
Credit report or credit history: a report from a credit agency that contains a history of your payments on current and previous credit cards and loans. Banks and other lenders use your credit report to decide how likely you are to repay a future debt and whether or not to lend money to you.
Credit rating or credit score: a numerical score that represents your credit-worthiness, based on your credit repayment history. The score is based on whether you pay your bills on time, your current level of debt, the types of credit and loans you have, and the length of your credit history. Your credit rating and credit report are used by banks and lenders when deciding whether or not to lend money to you.
Debit card: also known as a bank card or a cheque card. Allows you to access the money in your savings or checking account to make purchases, and requires that you enter your PIN number.
Default: when a cardholder fails to make the minimum required payment on their credit card bill, loan, or other line of credit. Defaults are a serious black mark on your credit report and negatively affect your credit rating.
EFT: Electronic Funds Transfer. The electronic transfer of money between accounts by ATMs, home computers and EFTPOS machines.
EFTPOS: Electronic Funds Transfer at Point Of Sale. Usually refers to a small machine that merchants use to receive payments from a customer’s credit card, debit card or gift card.
Everyday spender: credit card users who use their credit cards for everyday purchases and pay off their balances each month.
Full balance: the entire amount owing on your card that month, including any purchases made during the month, any amounts unpaid from previous bills, and any interest or fees charged.
Habitual spender: credit card users who keep a revolving debt on their credit card and don’t manage to pay it off each month.
Interchange fee: fee charged by your bank for a merchant’s bank to process a payment via your credit card.
Interest rate: rate at which your outstanding balance increases per month if your bill is not paid in full.
Interest-free days: the number of days you have to pay your bill in full before interest is charged on the outstanding balance. It is the period of time between the date of a purchase and when the payment is due.
Introductory rate: an initial interest rate offered to entice new cardholders to sign up for a credit card. These rates usually begin low but revert to the standard rates after six months or so.
Merchant: someone who sells goods or services to customers for payment.
Minimum interest charge: minimum amount of interest you would be charged if you are charged any interest. For example, if your total interest charge is $0.75 but the bank’s minimum interest charge is $1.00, you will be charged $1.00.
Minimum payment: the number listed on your bill as the minimum your bank requires you to pay off your credit card balance for that month.
Occasional spender: credit card users who only spend in splurges or on impulse (holidays, emergencies) and then spend months paying the balance off.
Ombudsman: if you have a dispute with your bank and haven’t been able to resolve it through their internal complaint resolution process, you can contact the Insurance and Financial Services Ombudsman in New Zealand on 0800 888 202. It is a free and independent service that resolves disputes with banks and other financial institutions.
Overdraft fee: an overdraft occurs when you make any type of payment without having that amount of money in your account. The bank will extend credit up to a maximum amount, the overdraft limit. Interest is charged daily on the balance of your overdraft amount.
Over-limit fee: penalty fee charged to you for exceeding the credit limit on your credit card.
Penalty fees: fees charged if you violate the terms of your cardholder contract. Over-limit fees are an example of a penalty fee.
Pre-approval: an initial notification that a customer is likely to be approved for a certain credit limit if they apply for that type of credit card. This is based on the bank’s information about their credit history as opposed to their official credit report, so it does not guarantee the customer will actually be approved if they apply.
RBNZ cash rate: the overnight interest rate that the Reserve Bank of New Zealand offers financial institutions to settle-up on inter-bank transactions.
Revolving account: an account where repayments are not fixed to a certain number of payments of a certain amount, and the account stays open even if the full balance is not paid off every month. Credit cards are the most common type of revolving account.
Rewards: benefits that come from using a rewards credit card, in proportion to the amount of money spent. Rewards come in four main types: cash back, frequent flyer miles, merchandise (shopping vouchers), and instant or general rewards.
Switching: changing from one product to another with the same financial institution, e.g. switching from a rewards credit card to a savings account with a debit card attached.
Universal default: where one financial institution treats a borrower as if they had defaulted with them because the borrower defaulted with a different institution.
Read the Methodology document in our star ratings report to find out how we rate credit card providers.
Who offers credit cards in New Zealand?
