NEVER ever take a Cash Advance or a Pay Day Loan

Getting into debt around Christmas is incredibly easy.  It is easy to fall into the spending trap and to feel obligated to spend large amounts of money.  The constant bombardment of advertising at this time of year was what prompted me to write my article providing 5 tips on saving money this Christmas.

However this year I noticed another worrying trend when it came to advertising: the number of payday loan companies that started to advertise on the radio, internet and on television.  "Strapped for cash...stop the worrying and say yes" type advertising  that most of us should ignore.

If you thought credit cards were bad...wait until you see cash advance loans

I have talked about how the best way to get ahead is to avoid credit card debt (where the interest becomes payable).  The interest rates on credit cards run at 19 - 22% p.a. which is outrageous...at least I thought so until I saw the types of rates being charged on cash advances.

The first site I clicked on charged 24% for a 30 day loan...24%...that's not a per annum rate.  That is the rate over the 30 days.  That is a 966% interest rate per year (compounded).

I was going to do a full summary of payday lending but this video encapsulates everything I wanted to say:

The more I research this issue the more saddened, outraged and worried I am for the financial health of some of the most vulnerable people in society.  However for an explanation which is far more complete than mine could ever be check out this brilliant video by John Oliver

But what if you need the cash right now?  Should I take a pay day loan?

No!  There is almost no situation I can think of where you should take a pay day loan.

When you're desperate, you're desperate right?  What if

Paying off debt? Remember that not all debt is created equal

Psychologically debt is a funny thing.  Most of us need it from time to time and debt is not always a bad thing.  In fact even consumer debt can sometimes be acceptable.  Your home loan is a form of consumer debt that most of us need to take out at some point in our life and this is fine.

Debt also needs to be paid back over time however many people do not pay back their debt in a logical manner.  There is an order that you should pay off your loans however many people do not pay off their loans in this way but rather spread their repayments equally over all their debt.

What is the logical order to repay debt?

Debt should always be paid back in the following order:

1. Repay the highest interest non tax deductible debt first
2. Repay other non tax deductible debt in order of interest rate from highest to lowest
3. Repay tax deductible debt (assuming the after tax cost of this debt is lower than the lowest cost non tax deductible debt)

You should not pay the principal on any of the cheaper debt until the most expensive debt is completely paid off.  Of course you should continue to make the interest repayments and allocate the principal component of this debt to the higher cost debt.

Want an example?  Ok assume you have the following debts...what order should you pay them off?

• A $300,000 home loan at 5% p.a.
• B $10,000 credit card loan at 22% p.a.
• C student loan of $20,000 which increases at CPI (inflation)
• D $200,000 tax deductible investment property loan at 6% p.a.

You should pay the principal amounts off in the following order

1. First pay the credit card loan off.  It is the highest cost by a mile.  You should pay only the minimum balance on everything else or convert them to interest only loans until this loan is paid off
2. Then pay off your home loan - it has the next highest after tax cost.  Yes it has the biggest balance but it is also increasing at the fastest rate so you want to get on top of this as fast as you can
3. Then pay off your investment property loan.  Assuming you are on a tax rate of 40%, the after tax cost of this loan is 3.6% 
4. Then pay off your student loans.  Obviously it depends on the rate of inflation in your country but in Australia inflation typically runs at 2-3% so it is easily your cheapest cost of debt

Paying the loans in this order decreases the amount of time that it will take you to pay down your loan balances and reduce the total amount of interest you pay over time.  By targeting the highest cost of debt first you are being the smartest and most efficient with your repayments.

What are some of the reasons that people don't pay their debts in a logical order?

People rarely pay off their loans in the optimal order.  In fact I know very few people that would pay off their loans in the order I suggested above.  Why?  Here are some of the reasons I think people pay off their loans in a sub-optimal way:

People like to see whole debt balances gone so pay off their smallest loans first

Most of us feel better when we have less debts to deal with.  What this leads to is people striving to pay off their smallest debts first even those these debts may not be costing us a great deal.  I know a number of people who have paid off their extremely cheap student debt before they pay off their home loans which are costing them far more.

If you can ignore the 'feel good' feelings that comes with paying off whole balances and concentrate on paying off your debt in a logical manner you will be much better off financially.

People like to see their loan balances decreasing

The painful thing about making minimum repayments (which may actually increase the loan on some types of debt) or by paying interest only, is that your debt balance goes nowhere.  You are paying money towards these loans but your balances aren't going down at all.

People generally prefer to see their loan balances going down from paycheck to paycheck and it can be rather disconcerting to see most of the balances staying the same even though you are making payments. 

In this case what you need to concentrate on is the fact that you are actually paying down your highest cost of debt loan faster as a result of concentrating your payments.  You are paying less total interest tomorrow because you are getting rid of your highest cost of debt today.

People can't be bothered changing their payment plans

Most forms of debt come with a pre-arranged payment plan and it takes effort to change it and most people can't be bothered going to their bank and changing this.  

For example most people would have their home loans and investment loans set up so that their are paying both principal and interest.  If you wanted to pay down your credit card debt faster you would convert these loans to interest only loans and pay the extra amount off your credit card debt.  After your credit card debt was paid off you would convert your home loan debt back to principal and interest.

Doing this takes effort and there is one big trap - you end up with a whole lot more free cash which you can blow.  If you are sensible and committed you should use all of this extra cash to pay down your debts and after the highest cost debt is paid off use all that cash to pay off your next highest cost of debt.

Paying down your debt does have a logical order.  If you follow it you can really improve your financial situation and get your debts under control faster.

How do you pay down your debts?  Do you have a pre-defined order?  Have you ever done anything illogical to 'feel better'?

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Learn to ignore distractions on your financial journey

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Learn to ignore the distractions on your financial journey

Like many of you, I am on a journey to achieve financial independence.  I slip up from time to time but for the most part I am disciplined and have a strategy to achieve my goals.  There are plenty of distractions along the way and some of them come from unexpected sources.

This post will cover one of the distractions that I received recently...and my tips for ignoring these impediments to achieving your financial goals.

My bank offered me a credit card...by trying to guilt me about not spending 'on myself'

Recently I received the most outrageous letter from a bank.  In fact I honestly thought that banks were more responsible than this.  I have my home loan with a different bank to the one which has my transaction and credit card account.  In order to try and get more business from me, my home loan account bank constantly sends me letters offering me all kinds of products (including credit cards).  That is fine...that is the business they are in.  

However recently I received the letter below (along with a pre-filled credit card application form).  It was so outrageous I actually decided to copy the relevant sections

It is truly incredible that a bank would actually tell people to 'get in touch with their impulsive side'.  That they would discourage savings and people acting sensibly truly

How to maximise the value of your free Credit Card Travel Insurance

I love to travel.  If I had a choice I would constantly be travelling.  One of the things that I always do whenever I travel is make sure I have the right travel insurance as getting sick in a foreign country can be financially disastrous.

Specialist travel insurers are great...

I had always used specialist travel insurers and have been served well by them.  I once booked a month long trip overseas with my brother and when he fell ill and was no longer able to travel I was able to get almost a full refund on all the flights and tours that I had booked until that point.

If you are looking for a specialist travel insurer I can highly recommend CoverMore insurance.  As long as you read the fine print and understand what you are covered for they are a well run, reputable insurer who does pay out when they say they will (that was my experience anyway).

...but this year I'm going to give my credit card insurance a go

I have had the option of free credit card travel insurance for a while but I had never used it.  I confess that I rarely trust anything that is free but I recently decided to look into it a bit more.  I have a Commonwealth Bank platinum credit card which offers free travel insurance and when I looked through the PDS for the free travel insurance (offered by Zurich Insurance) I realised that it was reasonably comprehensive.

It covered everything that CoverMore had offered me and more including unlimited medical coverage, an amount for delays, lost luggage, stolen goods and anything else I could think of.  Even better I found a few people who had actually claimed on their insurance and found that they paid out fairly and promptly as long as you met the conditions in their fine print.

Meeting the conditions was relatively easy.  All I had to do was spend at least $1,000 of my travel expenses on my credit card and I was covered for the whole trip.  The biggest downside was that it would not cover my girlfriend (although if you are married it covers your spouse and children as long as you spend $1,000 per person before you travel).

Make sure you maximise the benefit of your free credit card insurance when you purchase your holiday related expenses

Want to earn a 20%+ return? Pay down that credit card debt!

Wanting to take control of your finances and start to invest your hard earned money is an admirable goal.  Congratulations if you have just started out on this journey and keep going if you have been on it for a while. The first step on any journey to financial freedom, whatever your goals are, should be to pay off your high cost debt.  Nothing is more efficient than this and I'll explain why in this post.

Pay off your high cost credit card debt before you start to invest

I know your goal is to start investing, to start making millions in the share market and to put your financial worries behind you...but the first step on this process is paying off your high cost debt.  Pay day loans and credit card debt will kill you over the long term if you don't deal with it first.  All your financial efforts should go to paying this down first.

The 'problem' with this is that it is not fun...it doesn't feel like your getting ahead financially.  But trust me when I say it is the best investment you can make.

Investment returns are rarely going to equal the effective return you get from paying off your credit card debt

Credit card debt is incredibly expensive.  At rates starting at 19% p.a. it is almost daylight robbery.  The fact is that there are very very few share market investments that will make you this kind of return consistently.  If you get a consistent 10 - 15% from the share market or other investments you are doing very well.  

Getting a 20%+ return on your money is unheard of...but this is

If you find budgeting hard try 'Expenditure Smoothing'

Expenditure Smoothing (as far as I know) is not an actual financial term but it is what a lot of sensible people do to save for and pay for large expenditures that they have coming up.  I have adapted the basic principle to make it broader and have been using it for a few months now and it is working rather well so I thought I would share it here.

The principle is fairly basic:

If you have a large expenditure coming up that you know about, you spread the cost over as long a period as possible.  That is you start to save today (even if you can afford it in the future) for something where you don't have to pay into the future.

This is not any great insight.  People do this for holidays all the time - they know they are going on holidays in 6 months time so they start putting money away today so that they can pay for their airfares and accommodation and also have spending money.

You can use this principle for almost any large expenditure

Most people only use it for expenditures where there is a significant amount of planning involved (i.e. holidays) but I'm advocating using it much more broadly.  Any example you can think of which may blow up your budget, you can start to save for it early and then it costs you very little when the expenditure actually comes up.

For example, guys who are reading this - if you have been seeing your girlfriend for a little while and think that she may be the one you want to marry at some point (though are not super sure yet and want to give it more time) and you think you may propose in a year or 18 months then saving $300 a month starting this month means you'll have $5,400 in 18 months with which to buy the ring (and it doesn't blow up your savings plan around that time).

It may sound like I'm just advocating saving and I sort of am but this is about saving incremental amounts for specific (NOT general) expenditures.  I am going to outline below how you can actually implement the plan effectively.

You can also use this for unexpected expenditures

You can get the greatest benefit out of this sort of plan when you know the expenditure is coming up.  With the ring example above you can split the cost over 18 months which makes it super affordable.  However you can also use this plan for unexpected expenditures.

It is really quite simple.  If you get a bill that was

Surviving until pay-day: When things get tight

This post will cover my observations about how far you can go when you have busted through your budget and have very little cash until the next payday.

I confess that I never really thought I would be writing a post like this.  I am one of those people that is insane about keeping a minimum amount in my transaction account (anything less than $500 and I start to panic) and I have been lucky enough to have had a well paying job and low expenditures my whole life.  In the last month however my expenditures got out of control, my credit card bill was huge and I moved out of home - see full details in my March 2013 expenditure tracker.

Now, normally what I would do would be to transfer some funds back from my home loan offset account to cover me until pay day.  However, after paying my credit card bill last month, which took most of my wage and not being able to save a single dollar, I committed to not over-spending this month.  To this effect I said that I would not transfer funds from my offset account to my transaction account.  I could spend as much as I wanted to on my credit card however I was also trying to limit that.

At the end of March 2013, I had ~$315 in my transaction account which had to last me until the 15th of April.  Now this wouldn't be that big a problem, except I had committed to going out nearly every day of that fortnight and I hated the fact that I would have to cancel anything for financial reasons.  Those who are good savers out there are probably shaking their heads however I'm sure there are plenty of people who know the feeling.

I am proud to say that I got through the fortnight on that amount of cash.  At payday (today) I have $30 left in my transaction account

Here are some of the techniques I used to conserve cash while trying to get to the end of the fortnight and still maintaining a full social life.

• Deferred some non essential expenditures
• In a recent post I wrote about how I could upgrade my phone and save money however it would require buying the phone outright
• As I wrote that post I was about to purchase the phone (albeit on my credit card) however in light of the above I decided to continue using my old phone and just get the cheaper SIM card until my expenditures come under control
• I went hunting for coins
• This may sound silly, but if you are like me and HATE coins you may be surprised how much you have lying around your house and office
• I am addicted to my morning coffee and although I could have cut this out for the two weeks, I figured that if I could fund this from coins I found lying around the house then I was effectively not spending on it
• I found ~$100 in coins around my house.  These were in trousers, drawers, jars and (oddly enough) shoes
• In the end the coins also paid for a few times when I forgot to take lunch
• I ate at cheaper places when catching up with friends
• This can actually be done quite subtly if you have arranged to catch up but have not organised a location for a lunch or dinner
• Instead of going to a steak restaurant which is going to probably cost $40+ for a meal with a wine I went to cheaper Chinese places - just as much fun, just as tasty but for a fraction of the cost
• I used the credit card too much
• This was an interesting experience actually.  I never really understood how people managed to rack up so much credit card debt and then had trouble paying it back
• When I no longer had cash to spend but still wanted to spend I found myself putting everything on my credit card, from dinners and drinks to presents and various other expenditures
• I can see how easy it would be to get into serious debt if you were living month to month and this month's wage constantly went to pay last months credit card bill
• I saved the cash for days when I had to split bills
• Whenever you go out in a group, splitting the bill is almost always a cash transaction (i.e. credit card is not really an option)
• This was particularly challenging towards the end of the fortnight when I had a few group dinners and I knew that I had to conserve my cash for these events

Before anyone says it - I know that

What are the most efficient ways of using your credit cards awards points?

Credit card awards schemes are one of those nice to have features of a credit card however it should not be central in your decision to choose one credit card over another.  The fact is that the points are worth so little that unless it is an 'added benefit' for the same cost you probably should not bother.

Most people realise this.  Indeed, when post people work out that it costs them ~$14,000 - $18,000 worth of expenditure to get $100 worth of value most people stop worrying about the points and then redeem them every time they realise that they have a decent balance.  However although the seem to have such little value, there are still ways you can optimise the value you get from them - also this post is to  remind everyone that uses these rewards systems that the points can and do depreciate in value so it is best to use them reasonably quickly.

Gift cards are almost always the best value option

I have done a post on this before which spells this out in more detail but I thought I would outline again why gift cards and vouchers are always the best option.

You should never use your points to buy products.  Go online and see how much the product actually costs and then work out how many points it is costing you and you will see that it can be double or triple the regular price using your points.

Using your points to get cash is also a terrible idea.  The difference in the number of points it takes to get $50 worth of cash versus a $50 gift card to buy groceries is astounding!  Getting cash or reduction in your credit card bills are almost as bad value as getting products.

A better way to get the items you want is to redeem your points for gift cards and use these to buy products

If there is a particular product you want then go and see what stores you can buy this item from and get a gift card from that store - it will work out much cheaper than using your points.  However if you really want to maximise your points and the value for money you get then you should do the following:

1. Work out what the cheapest gift card is
• Gift cards do not all cost the same amount of points.  Cards for supermarkets tend to cost less than cards from other retailers (this is not always the case so make sure you check with your rewards provider)
2. Buy the cheapest card from a store you regularly go to (it does not have to be the one you want the item from)
• If you shop at a particular supermarket often and this has the cheapest card then you should go for this
• Alternatively fuel cards are often very cheap as well and if you have a car you are always going to use it
3. Use the cash you save from this other store to buy the item you want
• In this way you are getting the item you want for effectively the best points value that you can get

You tend to get better value when you redeem more points at once...BUT don't wait for too long

With most rewards systems the amount of value you get from gift cards tends to increase the more points you accumulate.  Typically speaking if it costs you 8,000 points to get $50 worth of value it should cost you less than 16,000 points to get $100 worth of value.

Credit card companies and rewards programmes do this deliberately for several reasons.  Firstly they make more money if they don't have to pay out the cash as often and and secondly every so often they increase the number of points it takes to redeem a certain amount of value so they win when they charge you more points to get the same amount of money.

The best thing for you to do is to strike a compromise.  Know how much money you typically spend on a credit card and if it is going to take you an extra year to get from a $250 gift card to a $500 gift card and you are only saving 500 points then it is probably better for you to get a $250 gift card each year.  You may lose a little bit in terms of the points it costs you but you have the benefit of getting the first amount earlier and the risk that your points reduce in value is diminished.

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How Many Credit Cards Should I Have?

Most of us are inundated daily by offers for credit cards, each with deals that seem better than the last.  In the last week I personally have received offers or seen advertisements for credit cards at the following locations:

• From the bank my home loan is with (which is separate to my everyday transaction account)
• While filling fuel (gas), the fuel company offered a credit card which makes it faster for you to go through the pump
• I went to buy a birthday present at a department store and when I was at the checkout the girl at the counter asked me if I would like to sign up to that store's credit card program
• I received an email from my airline frequent flyer program offering a dedicated credit card
• From another airline I received a credit card offer where I would get a free flight voucher upfront

Most of us would already have one (maybe two) credit card/s and the real question we have is whether we should sign up for another.  There are plenty of benefits and cons to signing up for multiple credit cards and I have outlined a few below.  I should note very early on that this, like so many other situations, is totally dependent on the individual and their financial circumstances and ability to control their impulses and debt.

Pros of getting an additional credit card

• Extra 'on demand' finance available should you ever require it in a hurry
• The benefit of being able to have extra funds available when you are in a pinch cannot be overestimated
• The up front deals or cash backs on some of these credit cards are actually outstanding 
• The Qantas Frequent Flyer credit card for example offers you 32,000 frequent flyer points if you sign up to their credit card.  You would normally have to spend $32,000 or higher or do some serious flying to get this number of points
• National Australia Bank (my home loan provider) offers a fee free credit card if you have your home loan with them with no strings attached

Cons of getting an additional card

• The temptation to spend on this card may be too much for some people
• If you are not the type of person that controls your expenditure well then getting an extra card is not for you
• For example some people I know have a very low limit on their credit card because they know they will spend up to their limit every month.  Personally I do not have this problem so my limit is well above $10,000 even though I rarely go above $2,000 in a given month
• It impacts your ability to get a loan

Credit Card Rewards Programs: Always take the gift card

I was recently speaking to an acquaintance that works for a rewards programme of a major credit card provider and he made an interesting statement.  He said that you should always take the store gift card as your credit card reward and never ever take the cash or products. 

I confess that I had never really thought about it too much.  I had two rewards programmes.  One with a credit card that I wanted anyway (that happened to come with a rewards programme) and the other with a corporate Amex card which my employer gave to me where I was allowed to keep the rewards points.  However after he made that statement (and me figuring he knew what he was talking about) I decided to look into it and it turns out that he was absolutely right.

In terms of efficiency of rewards points (generally) speaking - you get the best 'value for points' in the following order:

1. Gift cards for Retail / Travel stores
2. Gift cards relating to staples (e.g. groceries / fuel)
3. Products mailed to your door
4. Cash

I think everyone realises that cash is a pretty crumby deal however I had never realised the extent to which the products are over-priced in terms of cash-equivalent rewards points.  For example with my Commonwealth Bank Rewards Card I get the following offers:

• Cash: 200 points = $1
• Fuel / groceries; 185 points = $1
• Retail store: 174 points = $1  (164 points even you order more than $500 worth)

It should be noted that for the retail stores you get a scale benefit.  If you are ordering gift cards which are worth more than $500 then the price drops even further making them by far the best value.  If you then do the simple exercise of price matching some of the goods you can buy the results are quite astounding

Example 1: Apple iPhone 4 16 GB

• Rewards program cost = 177,600 points. 
• This is the equivalent of 177,600 / 164 = $1,083 in retail store cards
• The retail price for this phone in Australia is about $600 - $700 depending on where you buy it from

Example 2: Panasonic Lumix DMC-SZ1 Digital Camera

• Rewards program cost = 50,100 points
• This is the equivalent of 50,100 / 164 = $305
• Retail price is about $200 - $250

The mark up on these products has to be seen to be believed.  I tried this on both my Amex rewards as well as my Commonwealth Bank rewards and the outcome was the same (Amex offered better deals for grocery cards vs retail so look to see what your provider offers). 

The best strategy therefore is to buy the cards that offer you the best value and either buy other things you need with them and use cash to buy the item that you originally wanted OR exchange them with others who want them for cash.

Travelling overseas: Credit Cards vs Travel Cards

As I mentioned in my April 2012 expenditure review post I am going overseas at the end of this year and have been looking into the most efficient way to take funds with me.  When I have travelled previously I have used a combination of cash / travel card / credit card and debit card (I have never used travellers cheques as they never seemed to stack up for me).

At the very minimum I carry around A$500 (~US$500) in the local currency when I travel.  About $350 of this is as a float which I use to spend on various things and $150 is in different currencies (I have US dollars, Euros and Canadian dollars) as an emergency fund (I chose currencies that I figure will be accepted in every place in the world). 

On a month long trip I expect to spend ~$3000 - $5,000 so the question becomes - what way should I carry my excess funds around with me?  There are really 4 options

• Credit Cards
• Travel Cards
• Debit Cards
• Travellers cheques

I am going to cover the relative pros and cons of each of the above options (excluding travellers cheques which I have never used) below.

Credit Cards

• Pros
• Typically the best exchange rate of all the options
• Interest free period on purchases / reward points build up
• You already have one and you can keep using the same card when you go home
• Cons
• You typically get charged interest on ATM withdrawals from the moment you withdraw the cash (i.e. no interest free period) as these are counted as cash advances
• You also get charged currency conversion fees with most cards (For Australians you don't with the GE Finance 28 Degrees MasterCard which is a brilliant option)
• There is a real risk in less developed areas that your card details will be stolen
• If you haven't warned your bank that you will be using it there is a fair chance that they will stop debits on your card until you contact them (which in an emergency is a real pain)
• Susceptible to exchange rate movements

Travel Cards

• Pros
• You can lock in your exchange rate today and have certainty around your holiday budget
• You are using your cash which you have pre-loaded onto the card so there is no interest payable
• If you are travelling to a location where you have loaded the relevant currency (i.e. if you are travelling to Europe and have loaded Euros) then ATM fees are lower than most credit cards / debit cards
• Cons
• Often have lots of hidden fees
• You pay a (typically) 1% fee on all amounts deposited onto the card
• If you go to a country with a different currency to the one on your card then the fees really start to add up (e.g. I went to Egypt with a USD card and the fees were well above 4% plus the ATM withdrawal fee)
• The exchange rate is typically not as good as the one you get with credit cards or debit cards
• When you come back to your home country the money left on your card is 'trapped' and you have to suck up the high fees mentioned above to get your cash off the card.  Also you are then subject to the exchange rate risk you were trying to avoid

Debit Cards

• Pros
• You are using your own money from your bank account with the same pin.  There is no set up cost to this option and no interest payable on amounts withdrawn from ATMs
• You do not have any exchange rate risk when you get back
• Cons
• Exchange rate risk for the duration of your trip
• Typically not as good an exchange rate as credit cards (but is often better than travel cards)
• Very high ATM costs (when I went to Hong Kong it cost about $8 per withdrawal regardless of how much I took out of the ATM)

My preferred option

Having used all of the above options I have more recently started to use a combination of credit cards and debit cards.  If you find a credit card that has very low fees for overseas transactions (for example for Australians the GE Finance 28 degrees MasterCard has no annual fees, no currency conversion fees and no international transaction fees which makes it perfect for international travel) and combine this with a debit card which you use to withdraw large amounts of cash at a time (e.g. $1,000 every few weeks) then you can keep the fees to a minimum.

Having used the ANZ travel card I found that I did not like the travel cards very much.  Any certainty I had around exchange rate was far outweighed by the exorbitant fees.  Further exchange rates can move in your favour and you lose the benefit of this with a travel card.  I also lost significant value taking money off the card at the end and it expired after 2 years which meant that I could not even keep it for travel that I was planning to do in the future.  Also in some places the travel cards are not common and there is a bit of a hassle getting them to accept it.  Overall it is not worth the effort in my opinion.

Disclaimer: I get absolutely nothing for promoting the 28 Degrees MasterCard.  I just think it is a great product which I found recently and will be signing up for in the next few months.

Weekend Warrior: Visa or Mastercard? Does it make a difference?

While I was doing research for a blog post that I want to write on credit cards I came across this great article written by the credit products review website Canstar.  It was a brief article on the difference between Visa and Mastercard (and whether it makes any difference when you are choosing what credit card to select).

Visa and Mastercard are actually only processing systems which allow the retailer to process charges from your financial institution.  They actually have nothing to do with the issuing of cards or the payments that flow too and from you to the retailer.  Nor do they have anything to do with your rewards programme, the fee you get charged or the interest rate you get charged.

Given that both cards are accepted in over 200 countries and that most retailers accept either Visa or Mastercard it actually makes very little difference which one you have as there is unlikely to be a situation where one is accepted and the other is not (note that American Express does not have anywhere near this level of penetration and I have seen plenty of signs saying Visa or Mastercard only). Therefore it makes little or no difference whether you choose Visa or Mastercard.  Much more important is the financial instution that you choose and the deals that they are offering for your credit card.

If you want to be safe then if you have two credit cards you can make one a Visa and one a Mastercard.  Note that if you do want an Amex I would strongly recommend also getting a Mastercard or a Visa.  I would never recommend Diners Club as I don't think they are widely accepted outside the United States (Diners Club is a traditional charge card where the balance has to be paid off every month)