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Considering credit cards: focus on the interest – and whether you need one

‘The main thing to consider is the interest rate. Don’t get blind-sided by special offers’

More than half the Irish population have a credit card and we spend about €1 billion on them every month. Despite this, research by the Irish League of Credit Unions suggests almost seven in every 10 women and just over half of all men don't know what interest they pay on their plastic.

So is it worth shopping around more for a better deal or, indeed, do we even need credit cards at all in modern Ireland?

Who are the main players offering credit cards?

The main banks are the dominant players in the credit card sector – AIB, Bank of Ireland, Ulster Bank and Permanent TSB, as well as KBC. There is also Avantcard, a company based in Carrick-on-Shannon in Co Leitrim, that took over the MBNA business a few years ago. It subsequently acquired the Tesco credit card business in Ireland. An Post recently launched a credit card too, which is also operated by Avantcard.

What about these new “challenger” banks – aren’t they shaking things up?

Unfortunately not. Or, at least not yet. The growing threat to traditional pillar lenders from online upstarts like Starling, Revolut and N26 has yet to make any impact for Ireland’s more than 1.5 million active credit card holders.

Observers believe these digital-only banks may start offering overdrafts and loans at some stage in the future, but there are no noises about credit cards right now.

So, which is the best credit card to go for?

It depends what you are looking for really. Is it just the cheapest interest rate? Do you want a year-long-no-interest deal to help you clear your debts? Do you think you can actually make some money from your credit card by getting cash-back on purchases? Maybe you like to use your credit card on far flung holidays and want to avoid foreign exchange charges, or are you a bit clumsy with mislaying your credit card and thinking you’ve lost when you really haven’t, or are you one of those flashy types who wants a high-flier status symbol which gives you VIP treatment at airports?

Mmmmh ... let’s just start with the cheapest

It’s a good place to start. AIB’s Click Visa card is offering the lowest rate in the Irish market at the moment – at 13.8 per cent typical APR. There is no annual fee.

Next cheapest APR after that is Ulster Bank’s Black Mastercard, with a 16.1 per cent typical APR but that comes with a minimum salary requirement of €40,000, which will rule out a cohort of consumers.

Third cheapest APR is AIB’s Platinum Visa card, at 17 per cent. But, again, you’ll need a salary of €40,000 or more to be considered.

Why would I even look at anything other than the cheapest?

Well, there are a number of reasons. While AIB’s Click Visa is the best for APR, it doesn’t have any introductory offers for switching over to it. Unlike Ulster Bank’s Black Mastercard, which will charge 0 per cent interest on purchases for the first six months, and 0 per cent interest on balance transfers for the first year.

AIB will also give you a special reduced 3.83 per cent rate on its Platinum Visa for both purchases and balance transfers for the first year.

Those looking to get on top of mounting credit card debts might look to the cut-rate introductory offers to give them a bit of breathing space. "There is nothing to stop you from switching again," says Daragh Cassidy, of price comparison website bonkers.ie. "Our mantra is that switching saves, but the only issue is that a bank might not take on your business if they feel like you are switching too much."

There’s also the hassle factor. “It will also involve proof of address, proof of identification, recent current account statement ... if it is not your own bank,” says Cassidy. “So there is a little bit of work involved, which can sometimes put people off. But if you have a big balance you feel you are struggling to pay off, switching to a card which has a really low introductory rate could save you money.”

The key thing is that you don’t continue to rack up spending.

Is that all there is to consider?

No. There are various bells and whistles attached to other offerings on the credit card market. “This is where people need to sit down and say to themselves what it is they value,” says Cassidy. “I think you should be looking for the one that has the lowest rate – anything where you have to spend money to make money often isn’t good.

“But that’s not to say for people who are diligent, who pay off their balance in full and on time each month, that these cashback deals can’t be good.”

Cashback deals?

Some credit cards allow you to “earn” money while you spend. For example, with AIB’s Platinum Visa you get 0.5 per cent cashback on spending between €5,000 and €50,000 over a year. This means you can “earn” up to €225 a year.

Of course, that’s assuming you always clear your monthly repayments on time. Avantcard and KBC also have reward schemes. KBC’s Cash Reward card, for example, pays up to €10 a month for grocery and online purchases. However, its 18.25 per cent typical APR is significantly higher than the cheapest on the market.

Avantcard offers 1.25 per cent cashback on grocery, petrol/diesel, restaurant and entertainment purchases up to €12 a month – but with a 20.6 per cent APR.

Any other perks worth considering?

Yes. Ulster Bank’s Black Mastercard has no foreign exchange fees. Usually, you can be charged around 2 per cent on overseas purchases made on your credit card.

“If you’re fond of shopping abroad, particularly in countries outside the euro zone, this could be a good card for you,” says Cassidy. The same card also features Priceless Cities, a discount deals scheme for home and abroad.

Ulster Bank, Bank of Ireland, AIB and KBC all offer the same scheme on their Mastercards.

Another feature to consider is instalment plan options, currently offered by Bank of Ireland and KBC. If you are buying something on credit card which is greater than €500 – a laptop for €2,000, say – you can ring the bank and ask them to put it onto a lower rate of interest. “It’s almost like a personal loan,” says Cassidy. “They’ll spread the cost over 12 or 18 or 24 months with a lower rate of interest.”

The reduced Bank of Ireland rate is 6.9 per cent APR while KBC offers 8.99 per cent APR.

Separately, Ulster Bank and AIB cards feature innovations that allow you to temporarily lock your card if you think you might have lost it, but aren’t sure. If and when you find it, you can easily unlock it again using an app. It saves the hassle of cancelling your card outright.

Ulster Bank and AIB cards offer Google Pay and Apple Pay mobile payments, as does KBC along with Fitbit Pay and Garmin Pay.

And, not that I’m a bit flashy, but you mentioned something about a high-flier card?

While the Irish market doesn't really offer the status symbol card – like the American Express Platinum in the US – Bank of Ireland teamed up with Aer Lingus earlier this year to bring out the Aer credit card. It offers two free return fares to Europe, when you spend €5,000 or more within a year on the card, with other perks like fast track and priority boarding, airport lounge passes, complimentary drinks and snacks. But it comes with a 26.6 per cent APR and €7.99 monthly fee.

It’s worth mentioning that Bank of Ireland’s Platinum Advantage card also carries a yearly fee of €76.18. These charges are on top of the Government stamp duty of €30 a year, which applies to all credit cards.

There’s a lot to consider then …

“The main thing to consider is the interest rate,” says Cassidy. “Don’t get blind-sided by all the special offers, because a lot of the offers might not even apply to you. And be prepared to look outside your own bank – you don’t have to be an AIB customer to apply for and AIB card, for example. It might make the process a little easier if you are with the bank, but they are all hungry for business and will accept applications from customers other than their own.”

And, what about not considering a credit card at all?

“I don’t see credit cards as mandatory: they are increasingly not needed,” adds Cassidy. “They are very much an Anglophone thing. You go to countries like France, Spain and Germany, they almost don’t even know what a credit card is.

“Sometimes if you have a credit card with a limit of €3,000, say – that might be emergency cash, if anything were to happen. But if you’re not using your card, you will still be charged the annual stamp duty.

“You can increasingly make payments with a Visa debit rather than a credit card. I wouldn’t look down on someone who didn’t have a credit card – I’d almost look up to them.”

Three tips to bring credit card under control

1: Stop spending. There is a lot to be said for cutting up your credit card. The account will still be there. If you still have the number, you can still buy online. But if you are afraid that you are using your card frivolously when you are out – that extra round of drinks when you should have gone home, for instance, or the impulse purchase in Brown Thomas – maybe cutting it up so you can’t use it physically will help bring your spending under control.

2: Look at the minimum you are paying back each month. With some cards, you only need to pay off €5 or 3 per cent of the balance. Just paying back the minimum means it will take years to settle your debt. The minimum is not a target, it is the least before you get into trouble. Always try to pay as much off as you can – ideally the full amount every month.

3: Transfer to a credit card that has introductory offers, like 0 per cent on balance transfers. You will get charged no interest for up to a year, helping you get your spending under control. But the key thing is to stop putting new debt on your card.

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