Thinking about how you will use your credit card will help you compare the options and get the best card for you.

Work out how much you can pay off each month

Knowing this will help you choose the best-value credit card.

If you can pay the full balance each month

Consider a credit card with more interest-free days. This means you won’t pay interest as long as you pay the balance within a set number of days (for example, 55 days). These cards may have a higher interest rate and an annual fee, but that could be worth it.

If you can’t pay the full balance each month

Look for a no-frills card with a low or no-interest rate and a low annual or flat monthly fee.

Set a credit limit you can afford

When you apply for a credit card, your bank or credit provider will offer you a credit limit. This is the maximum amount they’ll lend you, and it is based on your ability to pay it back within three years.

If you’re worried about overspending, you don’t have to take the full amount offered. Think about your spending habits and how much you can comfortably afford to pay back.

Weigh up the pros and cons of card options

Store cards

Store cards can be an expensive way to shop. You can only use them in that store, and they may have higher interest rates. Check if the benefits are worth the higher rate.

If a store offers an interest-free deal, check when the deal ends. Also check the interest rate on new purchases (called the ‘purchase rate’), as it may be higher than for other credit cards.

Rewards programs

Credit card reward programs sound good — you get something back simply by spending on your card. For example, you could earn points you can use to buy movie tickets or flights.

But cards with rewards programs often have higher interest rates and extra fees. They could cost you more than you get back. Check if the benefits you get are worth the higher cost.

Extras like travel insurance

Some credit cards come with ‘complimentary’ extras like travel insurance for overseas trips. Be aware that extras are usually not free. The cost may be covered by higher interest or fees.

Other cards offer ‘cash back’ (credit on your account) or discounts on goods or services. Weigh up if what you will get back is worth you paying more in interest or fees.

Compare credit cards

Compare credit cards from different companies to find the one that suits your needs.