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Watch out for “free” credit card deals
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By Tammy barton

“Get a complimentary flight”, “earn up to 30,000 bonus points”, “collect two points for every dollar you spend.”

These are just some of the deals credit card companies use to get our attention. They sound great—who wouldn’t want a free flight?—but the deal is never as sweet as it seems.

One of these deals landed in my inbox this week from an airline offering a free one-way domestic flight if I was approved for their credit card. A closer inspection revealed that to qualify I would need to spend $1000 in the first 60 days, plus pay an annual fee of $29, followed by $69 each year after. I eventually found the interest rate hidden behind a series of links — 14.99% p.a. on purchases and 21.99% on cash advances. The card would also qualify me for interest-free finance on travel deals and airline points at a rate of one point for every $100 spent. (I did the maths and would have to spend a whopping $50,000 to earn the maximum 500 points per year.)

Air mile rewards are the prize for using this generic, mock credit card.

Does it look like a good deal to you? It might be if you’re disciplined, never overspend and always pay off your credit card balance before it starts earning interest. But the credit card company and airline are betting otherwise. They’re playing the law of averages which tell them that the average Australian credit card holder has a balance of $4300 and pays around $700 in interest every year. Suddenly that free flight looks pretty expensive!

Before you sign up for a credit card deal, make sure you dig deeper into the details. And remember that the only way for a credit card to work for you is to pay the balance in full every month and never use it for cash advances — when you withdraw cash against a credit card, it begins attracting interest immediately.

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