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Ditch and switch: This is the smart way to use a credit card this silly season

Australian family having Christmas lunch. Australian money notes.
Credit card debt without the interest? Here's how to do it. (Source: Getty)

The season is getting silly… but you want to stay smart with credit card debt.

Otherwise, your so-called Christmas freedom date - the date on which you get clear of the credit card cost - will be well into 2023.

The dirty little secret of the credit world is that despite huge fluctuations in official interest rates in the past decade and a half, the average credit card rate has remained intransigently at 18 per cent.

Read more from Nicole Pedersen-McKinnon:

Yet there is a credit card that charges just 9.9 per cent on ongoing debt - as in, on any debt that you roll over from month-to-month rather than clearing your balance in full. The card is the Bankwest Breeze Classic Mastercard.

There are also several cards that let you transfer an existing balance and pay no interest on it for a period of up to 36 months.

These represent a fantastic, cheap way of ditching a credit card debt without paying an extra cent on it.

I think of them as get-out-of-jail-free cards.

What Aussies get wrong

Despite all these opportunities for no and low interest, a Finder survey given exclusively to Yahoo Finance shows a whopping 55 per cent of credit card holders have never switched.

Millions of Australians have never changed cards and are paying over-the-odds interest.

In fact, 6 million of us have never changed our primary credit card.

Only 8 per cent of card holders have changed their card in the past year and 35 per cent switched more than a year ago.

But this misplaced credit card loyalty is costing the average cardholder $153 a year.

And there are advantages to switching cards far beyond just interest, too.

Reward offers and valuable signup bonuses could see you flying for free rather than flashing the plastic and getting nothing additionally for it.

In fact, some signup bonuses are so generous that they could on their own get you an overseas flight.

We will get to that shortly.

How do you choose the best card

In order to determine the appropriate card for you – remembering that you don’t want to apply for too many as this will push down your credit score – you need to know your credit card personality.

Are you a points gatherer, paying off your card in full every month but using it to get something for nothing in terms of shopping rewards or flight frequent flyer points?

In this category I would also put those clever mortgage holders who use a credit card for all their monthly expenses in order to sit their salaries in an offset account alongside their mortgage for the whole month.

These are the best signup bonus and ongoing points cards, according to Finder as at November 14.

Biggest bonus points table.
Biggest bonus points table.

Don’t miss that for these bulk points, and usually all special deals, you need to be a new customer.

Here are the best-value reward point cards on an ongoing basis, according to Finder analysis:

Best overall value points credit cards table
Source: Finder

Do you simply want to buy yourself time by using a credit card?

In this case, your priority will be finding a card with the longest interest-free period.

Forget the old 55-days – you can get far more on an ongoing basis and new customers (again) can enjoy more than two years initially.

Best credit cards with the longest interest-free period
Source: Finder

And here are the introductory offers to consider:

Best 0% p.a intro offers
Source: Finder

Note the appearance of Bankwest’s Breeze again in this table.

Though it doesn’t carry the longest 0 per cent rate, the revert rate after the honeymoon rate is the cheapest on offer.

Have accrued debt? The card that is therefore right for you could be one of the aforementioned no-interest balance-transfer ones.

Best 'balance transfers' credit cards (for rolled over debt)
Source: Finder

Just an important safety note on those interest-free offers though: make sure you do not use these cards for any new spending and if you still have debt at the end of the interest-free period, cut up the card quick.

The interest rates in both cases will be extortionate. This is how they can offer that 0 per cent.

When it comes to credit cards, a set-and-forget approach is almost always wrong.

You could instead use a credit card to pay far less and travel far further.

Nicole Pedersen-McKinnon is the author of How to Get Mortgage-Free Like Me, available at www.nicolessmartmoney.com. Follow Nicole on Facebook, Twitter and Instagram.

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