Credit cards are handy old things to have if you need short-term access to cash or might need an emergency source of funds at certain times throughout the year. A credit card provides up to 56 days interest-free credit as long as you pay your bill in full and on time.
But if you’re relying on a credit card to make ends meet or fill gaps between paydays, that’s when it’s in danger of becoming a burden, because it transforms into an expensive form of debt the minute you start struggling to pay your bills in full each month.
“If you are considering switching your credit card because you’ve built up an expensive debt on it, rather than switching your credit card, we would suggest that you take out a low-interest personal loan from a credit union or bank and use that loan to clear your credit card bill,” says Kevin Johnson of the Credit Union Development Association. “You’ll still need to repay the loan but as it will be cheaper than your credit card, it should be easier to clear the debt.”
At the very least, avoid the minimum payment trap, which is where you pay a minimum amount, usually around 2pc to 5pc of the total amount you owe, off your credit card every time your bill is due to be paid. “It could take up to 20 years to pay off a credit card debt if only making the minimum payments off your card,” says Johnson.
But if you’re reading this because you need to get a better deal as part of a concerted effort to pay off a minor credit card debt (say, up to €5,000), then certainly you could consider switching to cards with good balance transfer deals. For example, 0pc for up to 12 months is available with the An Post Classic credit card, while the AIB Platinum card has an introductory interest rate of 3.83pc on purchases and balance transfers for the first 12 months. Bank of Ireland’s Classic card has seven months interest free.
If you just want a card, Daragh Cassidy of price comparison site Bonkers.ie recommends looking “past all the cashback incentives, reward schemes and extras and focus on the interest rate first and foremost, as this is what the card is going to cost you”.
AIB’s Click Visa card has by far the lowest interest rate on the market with a representative APR of 13.8pc.
The next best is the Flex credit card from An Post Money with an APR of 15.7pc. “In general, the more premium or exclusive credit cards offer the worst interest rate, as you’re paying for the extras,” says Cassidy.
But if you do pay off your bills every month, then the interest rate will be less important than the perks and benefits. Among these perks are cashback, starter bonuses, travel miles, free flights and other exclusive offers and discounts.
The best way to benefit from a rewards card is to find one that suits your spending habits and lifestyle. For example, if you fly a lot, look for a card with travel rewards like free flights and free travel insurance
The best way to benefit from a rewards card is to find one that suits your spending habits and lifestyle. For example, if you fly a lot, look for a card with travel rewards like free flights and free travel insurance, such as BOI’s Aer card.
If you make a lot of purchases on your card every month, the Avant Money Reward+ Card, which has a relatively high APR of 22.9pc, offers €100 cashback if you spend €500 a month in the first three months. You can also get a 25pc refund on your interest (albeit up to a maximum of €24 a month).
You need a minimum salary of €40,000 a year to get it, but AIB’s Platinum Visa card offers 0.5pc cashback on spend between €5,000 and €50,000 in a 12-month period, up to a maximum of €225 a year. You also get access to the Visa Luxury Hotel Collection scheme, which offers benefits such as free room upgrades, breakfast, late checkout and room Wi-Fi at select hotels worldwide.
“Another benefit is that if you top up your card with money so that it's in credit, you can then withdraw money from an ATM abroad and not be charged the usual cash-advance fee,” notes Cassidy. “This used to be a common feature on credit cards but it’s no longer widely available.”
A relatively new feature of some Bank of Ireland (BOI) and An Post cards is to offer an instalment plan facility that acts like a handy personal loan. For instance, BOI’s main cards allow you to transfer a large credit card purchase of €250 or more onto a separate, lower interest rate of just 6.9pc APR and to pay it off in monthly instalments of up to 24 months.
“So perfect for big spends or even unexpected costs that might pop up,” says Cassidy.
Another feature worth checking is whether your credit card provider accepts Apple, Google or Fitbit Pay, as mobile payments are becoming increasingly popular. Avant offers no mobile payment options at the moment.
With most of the card providers you can get an additional card for a family member or three over the age of 16 or 18 at no extra cost and still only pay government annual stamp duty of €30 once.
At the end of the day, though, you can easily live without a credit card. “Fifteen or so years ago I think if an adult told you they didn’t have a credit card, you’d perhaps disparagingly wonder why,” said Cassidy. “Now, not at all. You can definitely live without one. And remember they’re very much an Anglo-Saxon thing – and always have been. The numbers with credit cards in Europe are a fraction of what they are in Ireland, the UK and the US.”
Furthermore, the fact that debit cards are accepted pretty much anywhere has removed one of the big advantages of credit cards. “You still hear of the odd car rental company or hotel requiring a credit card as a deposit but it’s getting rarer and rarer,” adds Cassidy.
Whatever you need or want from a credit card, the good news is that it’s quite easy to compare providers thanks to price comparison sites such as Bonkers.ie, Switcher.ie and the price comparison tool on the Competition and Consumer Protection Commission’s website, CCPC.ie.
How to switch credit cards
Step 1: Compare
Shop around and see what other credit card providers would do to win you away. Compare what’s on offer before you decide which one is right for you.
Step 2: Apply for your new credit card
Fill in an application form online or in a branch. Make sure you have the following information handy: your bank details; current credit card, loans and savings accounts; mortgage, if any; current account; and income.
Step 3: Close your old credit card account
Don’t forget to cancel in writing any direct debits you have on your old credit card account. Clear the balance and write to your old credit card company asking them to close your account and cancel your card. If you’ve already paid stamp duty in the current tax year, then they will send you confirmation that your account is now closed. Send this to your new credit card provider so you are not charged stamp duty twice in the same year.
Step 4: Wait for card approval
Once you get card approval you can activate your new credit card. Be sure to set up any previous direct debits from your old card on your new card to cover things like gym membership or subscription payments.
Potential saving: €100 a year
*All figures correct at the time of publication
