Find some of the terms in this table confusing? Jump down to our glossary to learn about key features and how to compare cards.
What types of credit cards are there?
Every credit card is slightly different and you should find one that has features that matter to you. There are 5 primary types of credit cards. Here is a quick explanation of each one. Below, we go into more detail and highlight our current top picks.
|Card type||Principal use||Pros||Cons|
|Balance transfer||Pay off existing debt with no / low interest||Save money on interest and pay down debt faster||Minimal perks and no interest-free days on new purchases|
|Rewards / frequent flyer||Earn points on your spending||Get rewarded for money you’d spend anyway||High interest rates & annual fees|
|No annual fee||Credit without an upfront cost||Costs nothing if you pay it off in full or don’t use it at all||Minimal perks and higher interest rates|
|Low rate||Pay off purchases over time while paying less interest||Saves you money if you carry a balance from month to month||Minimal perks|
|Business||Managing cash flow and separating spending||Offer distinct features for business (like accounting feeds)||Stricter eligibility requirements|
What is a credit card?
A credit card lets you spend money that you can pay back over time, usually with interest.
Unlike a debit card – where you need money in the bank – a credit card gives you a set amount you can spend (or borrow), known as your credit limit. You also get regular statements (usually monthly) and need to make repayments by the due date on them.
Want more details? Check out Finder’s guide to how credit cards work.
Pros & cons of credit cards
- Flexibility. If you have a big purchase to make, a credit card can be a financial "buffer" – letting you buy it and then repay it over time. If it’s used wisely, it can be interest free.
- Convenience. Credit cards allow you to buy what you need, when you need it. You can use them to shop in-store, online and overseas, with security features to protect against fraud.
- Rewards. Everyone loves perks. A credit card can help you get frequent flyer points, cashback on your groceries, flight upgrades or even gift cards.
- Debt. Credit card interest adds up quickly if you don't pay your balance on time, which could cost you hundreds (or thousands) of dollars and take a long time to pay back.
- Can be expensive. The average interest rate for an Australian credit card is around 20%. In comparison, the average interest rate for a variable rate personal loan is 14.41%.
- Sneaky fees and surcharges. Some businesses add a surcharge to credit card payments, which can be 1–2% of the total purchase cost.
Bottom line? Credit cards have a mix of great perks and understandable risks. A good rule of thumb (if you get a card) is to have a plan for paying it off and using the benefits.
How to compare credit cards
Here's a breakdown of features and charges you should know about.
|Fee or feature||What is it?||What you should know|
|Annual fee||The amount you'll have to pay each year just to use the card.||Higher annual fees usually mean more perks and rewards.|
|Purchase interest rate||The amount of interest you'll pay if you don’t pay your card off in full.||The lower the interest rate, the less you’ll pay in potential interest.|
|p.a.||This abbreviation of “per annum” is used for credit card interest rates, because the annual (or yearly) value is shown.||As an example, the interest you’d be charged over 12 months would be about 20% of your balance on a credit card with a 20% p.a. interest rate.|
|Interest-free period||The amount of time you'll get before you're charged interest on your purchases.||More days give you more time to pay off your balance so you won’t be charged interest.|
|Balance transfer rate||The interest rate you’ll pay if you transfer a balance from another card.||The lower the interest rate, the better. Most introductory offers are for 0% p.a. on your balance, but you may pay a one-time fee.|
|Cash advance rate||The higher interest rate you’ll pay if you take cash out or make an equivalent transaction.||Avoid cash advances unless it's an emergency.|
|Foreign transaction fee||The fee you'll be charged on purchases made in a foreign currency overseas or online.||There are plenty of cards on the market with 0% foreign fees.|
|Rewards program||Offers points and perks that you can earn for your spending.||Common features include points, insurance, lounge passes and premium services.|
|Minimum repayment||The lowest amount you need to pay by the due date to keep your account in good standing.||You can always (and should try to) pay more than the minimum amount. But paying less can lead to late payment fees and hurt your credit score.|
|Credit card network||The payment system that processes all your credit card transactions. Visa, Mastercard, American Express and Diners Club are the key credit card networks in Australia.||Banks and brands partner with Mastercard and Visa, so you'll see their logos on your cards. American Express issues cards and has its own network for processing payments. Diners Club has more limited availability.|
What's happening in credit cards in December?
The holiday season could see Australians using their credit cards more, with Finder research showing that we're set to spend a total of $30 billion on Christmas and other celebrations.
If you're planning to use a credit card and want some extra time to pay it off, getting one with a introductory 0% interest rate on purchases could help you save on interest charges for 6-12 months or more.
If you're more focused on travel goals, paying with a frequent flyer credit card could help you earn points – including 80,000+ bonus points with a new card. Just remember to pay off what you spend on the card by the statement due date to avoid interest.
But Finder analysis of RBA data also shows that Australians have $18.1 billion of credit card debt accrusing interest. So if you want to repay this type of debt, a card with a 0% balance transfer offer could help you save on interest and make it faster to pay off what you owe.
Updated by Finder's credit card senior writer Amy Bradney-George on 4 December 2023.
Should I get a credit card?
For many Australians, using a credit card is an everyday part of life. But not everyone needs a credit card.
In fact, Finder research has found that 72% of Australians could manage their money without a credit card. So they don't technically need a card but still choose have one for different reasons, including:
- For emergencies
- To earn rewards or frequent flyer points (which are not offered by most other accounts)
- To make big purchases
- To build credit history
- To pay off debt and/or get a balance transfer
Some people also like the security of knowing that a credit card uses the bank's money, especially when it comes to fraud. It means you're not directly out-of-pocket when suspicious transactions are investigated.
On the other hand, you don’t want to take on debt you don't need, especially if you're paying interest on it.
There are also some people who might be more susceptible to credit card debt. For example, people who tend to impulse shop could end up with a big balance and interest charges, which can take years to pay off.
Bottom line? You should weigh up the pros and cons of getting a credit card based on what you would use it for and how you'd pay it off. That way, you can decide if it's worth it for you – and see if there's a card you want.
Did you know? 2022 Finder research shows credit card loyalty could cost the average cardholder $153 a year. It pays to compare, and to switch when you find a better offer.
How to use a credit card (and avoid debt)
A credit card is convenient, but it also comes with a risk of debt. Here are 4 tips to help you stay on top of payments and make the most of your credit card.
- Ask for a credit limit you can manage. Credit card companies must determine your limit based on what you could "reasonably" afford to pay off over 3 years. But if the credit limit you're offered is higher than what you need, you can request a lower limit so you have more control.
- Pay more than the minimum. Only paying the minimum amount listed on your credit card statement can lead to years of debt and interest charges. So, aim to pay off the total balance – or as much as possible – by the statement's due date.
- Plan repayments. Set a monthly calendar reminder for the payment due date, or set up automated payments. Finder's credit card repayment calculator can also help you budget.
- Get help if you need it. If you’re struggling with your credit card, call your bank or provider to see what support is available. You can also get free financial advice by calling the National Debt Helpline on 1800 007 007.
Have questions about credit cards? We have answers
Why you can trust Finder's credit card experts
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