How to evaluate credit-cards and personal loans in NZ

It can seem like a big deal to pick the right financial product. It can be hard to choose between credit cards for everyday purchases and personal loans for big purchases in New Zealand. It’s important to make an informed choice because it could affect your finances for years to come. This guide will show you how to compare credit cards and personal loans in New Zealand so you can find the one that works best for you.

The first step is to know what makes these financial tools different from each other. A credit card gives you a revolving line of credit that is great for short-term purchases and building your credit history. A personal loan, on the other hand, gives you a set amount of money that you have to pay back over time. This makes it good for big, one-time costs like buying a car or fixing up your home.

When you finish reading this post, you’ll have a clear way to compare your choices. We’ll talk about the different kinds of cards and loans, go over the fees and interest rates, and show you how to use online tools to make your choice easier.

How to Understand Credit Cards in New Zealand

When used properly, a credit card can be a very useful financial tool. But since there are so many options, it’s important to do a full NZ credit card comparison to find one that fits your spending habits and financial goals.

Types of Credit Cards

In New Zealand, credit cards usually fit into one of three main groups:

• Cards with Low Rates: These cards have a lower-than-average ongoing interest rate on purchases. A low-rate card can help you save a lot of money on interest charges if you think you might carry a balance from month to month.
• Cards with rewards: A rewards card can be a great deal if you pay off your balance in full every month. You can earn rewards on your spending with these cards. These rewards can be cash back, points for goods, or air miles for travel. The most important thing is to make sure that the rewards are worth more than the higher annual fee.
• Balance Transfer Cards: If you want to pay off your current credit card debt, a balance transfer card can help. These cards let you move your debt from a card with a high interest rate to one with a low or 0% interest rate for a set amount of time. This can give you some space to pay off your debt without adding more interest.

Important Fees and Interest Rates to Keep an Eye On

It’s important to look beyond the main features when you compare credit cards. Be aware of these common costs:

• Annual Fee: A lot of cards, especially rewards cards, charge you a fee every year just for having the account open. Check to see if the benefits you get are worth the cost.
• Purchase Rate: This is the normal interest rate that is charged on new purchases if you don’t pay off your balance by the due date.
• Cash Advance Rate: The interest rate for withdrawing cash from an ATM using your credit card is almost always higher than the purchase rate, and it usually starts accruing immediately. 
• Fees for Late Payments: You might have to pay a fee if you miss a payment. Paying your bills on time every time is very important for keeping a good credit score.

Getting the Most Out of Credit Card Rewards

If you choose a rewards card, it’s important to know how the program works. Find out how much you would have to spend to get a good reward and compare that to the yearly fee. An air miles card might be perfect for people who fly a lot. For some people, simple cash back might be the best way to get value. The goal is to find a program that fits your way of life.

Looking at Personal Loans in New Zealand

A personal loan can help you reach important life goals, but it is a big financial commitment. You need to carefully look over the loan before you sign it to make sure it’s the right one for you.

Different kinds of personal loans

There are two main types of personal loans in New Zealand:

• Loans with collateral: A secured loan is one that you get because you own something, like a car or a house. These loans usually have lower interest rates because the lender has collateral. But if you don’t pay back the loan, the lender can take back the asset.
• Loans Without Collateral: You don’t have to put up any collateral for an unsecured loan. The lender makes a decision based on your creditworthiness and income. While these are less risky for you as a borrower, they usually have higher interest rates to compensate the lender for the increased risk. 

Learning about fees and interest rates

When comparing personal loans, it’s important to pay attention to the interest rate and any fees that come with it, just like with credit cards.

• Fixed Rates vs. Variable Rates: With a fixed interest rate, your payments will always be the same, so you know what to expect. A variable rate can change over time based on how the market is doing. This means that your payments could go up or down.
• Fee for Setting Up: The lender charges this fee only once to set up the loan. You can sometimes add it to the loan amount, but keep in mind that you’ll have to pay interest on it.
• Some lenders charge an early repayment fee if you decide to pay off your loan before the due date. Look for a loan that lets you change your mind without charging you a fee if you think you might be able to do this.

How Loan Terms Affect You

The loan term is how long you have to pay back the loan. If you choose a longer term, your monthly payments will be lower, but you’ll pay more interest over the life of the loan. If you choose a shorter term, your monthly payments will be higher, but you’ll pay less interest overall and be debt-free sooner. You have to find a balance between what you can afford each month and how much you’re willing to pay over time.

Are personal loans or credit cards better?

Deciding between loans and a credit card depends entirely on your needs. A credit card is useful for small, everyday purchases that you can pay off quickly. A personal loan with a set repayment plan is often a better, more responsible choice for a big, planned expense like a wedding or a car.

Getting credit can be harder for people with temporary visas, like work visas. You can get personal loans in New Zealand while on a work visa, but lenders will carefully look at how stable your job is and how much time you have left on your visa.

Things to Help You Choose

You don’t have to make these choices by yourself. There are a lot of online tools that can help you compare credit cards and personal loans in New Zealand.

• Websites for Comparing Online: There are a number of websites in New Zealand that help people compare financial products. They let you sort options by interest rates, fees, and features, which makes it easy to see how they compare.
• Advisors on Money: If things are more complicated or you’re not sure what to do, talking to a financial advisor can help you make decisions that are right for you. They can help you figure out where you stand financially and suggest products that will help you reach your long-term goals.

Your Next Steps

Picking the right credit product is a personal choice. You can make a smart and confident choice that helps your finances by learning about the different types of credit cards and personal loans that are out there, looking closely at the fees and interest rates, and using comparison tools. Before applying for any kind of credit, always read the terms and conditions carefully.

The Business Kiwi team is here to help you if you need professional, personalized advice on how to handle your business or personal finances in New Zealand. Call us to set up a meeting and let our experts help you make your financial future better.