Credit card advantages and disadvantages

Decide if a credit card is right for you with our comprehensive list of pros and cons.

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Credit cards can be a convenient way to manage your finances (or get rewards), but they can also be expensive and risky. If you’re deciding whether or not a credit card is right for you, here are some of the main advantages and disadvantages you can weigh up to make your decision.

credit card advantages and disadvantages infographic

9 advantages of using a credit card

Some of the perks of paying with plastic include:

  1. Security. A credit card can quickly be cancelled if you lose your wallet, and some cards give you the option of temporarily locking your card while you look for it. Visa, Mastercard and American Express cards also offer zero liability policies to help you get money back from any fraudulent transactions. On top of that, many cards offer 24/7 fraud monitoring services.
  2. Build your credit score. Your credit card account repayment history make up a key part of your credit file. If you keep your account in good standing, this information will help you build up a good credit score, which could increase your chances of approval for other products such as car loans or a mortgage. This sets credit cards apart from debit cards, as well as most buy now pay later services, including Afterpay. If you're trying to choose between a credit card and buy now pay later, Finder also has a guide that compares them.
  3. Interest-free days. If you pay your balance in full before the statement period ends, you can be rewarded with interest-free days on future purchases for a set period.
  4. Earn points. Rewards and frequent flyer credit cards allow you to earn reward points on every dollar you spend on eligible purchases, such as groceries and fuel. Rewards credit cards let you earn reward points to redeem with the bank’s rewards programs for perks including flights with partner airlines, products from the rewards store or cashback. Frequent flyer credit cards, on the other hand, let you earn points towards flights, upgrades and more with specific airline loyalty programs.
  5. You can request a chargeback if you’re unhappy with a product or service. You can request a chargeback through your credit card company if you have a dispute with a merchant, either in-store or online.
  6. Spend overseas. Although currency conversion fees usually apply, you can use your credit card overseas to make purchases in a foreign currency. There are even credit cards that charges $0 fees for international purchases, which could be useful if you often shop at international online stores or have an overseas holiday coming up.
  7. Emergency funds. Credit cards can be a financial safety net if you don’t have enough cash or savings to cover any unexpected costs that arise. Just remember that you have to repay everything you owe.
  8. Complimentary extras. Credit card features such as travel insurance, purchase protection and extended warranty insurance can save you money and give you peace of mind. Other value-adding features include complimentary flight offers, airline lounge passes and even free wine when you dine.
  9. Consolidate and pay off existing debts. Balance transfer credit cards allow you to move existing high-interest debts to a new account with a low or 0% promotional interest rate. This can save you money on interest charges and help you pay down debt faster.

7 Disadvantages of using a credit card

The downsides of spending with a credit card include:

  1. Interest rates. If you carry a balance from month-to-month, you’ll pay interest charges. Purchase and cash advance interest rates typically range from around 8.99% p.a. to 24.99% p.a. This means you can end up paying hundreds or thousands of dollars in interest charges, and could slow down the time it takes to repay what you owe.
  2. Credit damage. Missed credit card repayments and ongoing debts are recorded on your credit file and can impact your chances of getting a loan down the track. See our guide on how to improve your credit file for some tips.
  3. Credit card fraud. There are a range of fraud schemes that target credit cards. While you can be compensated for illegal transactions on your account, dealing with credit card fraud can still be a time-consuming and stressful experience.
  4. Cash advance costs. Financial institutions make it very expensive to use your credit card to get cash out or make other “cash equivalent” transactions (such as buying foreign currency or gambling). Using a credit card for a cash withdrawal will attract a cash advance fee worth around 3% of the total transaction amount. It also typically attracts an interest rate of 19-24% right away.
  5. Annual fees. While you can often get debit cards without annual fees, most credit cards have them. These can cost as little as $20 per year or as much as $1,450 depending on the card that you choose. Generally, the more perks you want, the higher the annual fee. If you want to avoid this charge, you can consider a no annual fee credit card – but make sure you look at all the other features to help find a card that works for you.
  6. Credit card surcharges. Businesses sometimes apply a surcharge when you pay with a credit card. For Mastercard and Visa products, this fee is usually 0.5-1.5% of the total transaction cost, while for Amex cards it could be closer to 2%. Whatever the case, this is an extra cost for the convenience of paying with plastic.
  7. Other fees. Depending on your card, you could be charged fees when you miss a payment, fees if you spend past your credit limit, fees for overseas transactions, balance transfer fees and even some rewards programs fees. If you carry a balance or don’t have access to interest-free days, there’s also a good chance interest will be applied to these charges.

Should I use a credit card?

Credit cards are suited to some people, but not others. As well as the pros and cons, you may like to look at the following factors to help decide if a credit card is right for you.

A credit card may suit you if you

  • Are at least 18 years of age
  • Are an Australian citizen, permanent resident or hold an eligible temporary visa
  • Have a regular source of income
  • Regularly pay your bills on time
  • Want to keep certain transactions separate from your everyday bank account
  • Are keen to earn rewards for your spending
  • Need more flexible cash flow
  • Can afford to pay a little extra for the convenience

A credit card may not suit you if you

  • Don’t meet the age or residency requirements
  • Often struggle to pay bills on time
  • Don’t have a regular source of income
  • Can’t afford annual fees or interest charges
  • Have bad credit
  • Are happy to just use a debit card

If you’re thinking about getting a credit card, it’s important to consider the benefits and disadvantages they offer based on your own circumstances. As well as helping you decide whether a credit card is right for you, this process can narrow down the range of cards you compare so that you can find an option that works for you.

Pictures: Shutterstock

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Compare credit cards

Name Product Purchase rate Balance transfer rate Annual fee
Kogan Money Black Card - Exclusive Offer
20.99% p.a.
0% p.a. for 24 months
$0
0% Balance Transfer Offer & $50 Kogan.com Credit
Finder Exclusive
Save with a $0 annual fee and a 0% introductory rate on balance transfers. Plus, earn $50 Kogan.com Credit and uncapped rewards points.
humm90 Mastercard
23.99% p.a.
0% p.a. for 36 months
$99
Long-Term 0% Balance Transfer Offer
Save with 0% interest on balance transfers for 36 months, with no balance transfer fee. Plus, up to 110 days interest-free on purchases.
Coles No Annual Fee Mastercard - Exclusive Offer
0% p.a. for 12 months, reverts to 19.99% p.a.
0% p.a. for 12 months
$0
0% Purchase & Balance Transfer Offers
Finder Exclusive, ends 30 June 2021
Earn 10,000 bonus Flybuys points and save on interest charges with 0% p.a. on balance transfers and purchases for 12 months.
HSBC Platinum Credit Card
19.99% p.a.
0% p.a. for 36 months
$29 annual fee for the first year ($129 p.a. thereafter)
0% Balance Transfer Offer & $29 First-Year Annual Fee
Save money with a 0% balance transfer rate for 36 months (with no BT fee), a first-year annual fee discount and free travel insurance.
NAB Qantas Rewards Signature Card
19.99% p.a.
0% p.a. for 6 months with 2% balance transfer fee
$295 annual fee for the first year ($395 p.a. thereafter)
Up to 110,000 bonus Qantas Points & First-Year Annual Fee Discount
Earn up to 110,000 bonus Qantas Points (90,000 when you spend $3,000 in the first 60 days and 20k after 12 months).
Citi Rewards Card - Balance Transfer Offer
21.49% p.a.
0% p.a. for 30 months
$49 annual fee for the first year ($149 p.a. thereafter)
30-Month Balance Transfer & Annual Fee Discount
Save on interest with 0% p.a. on balance transfers for 30 months with no balance transfer fee. Plus, a $49 first-year annual fee.
Citi Premier Qantas Card
21.49% p.a.
0% p.a. for 6 months
$175 annual fee for the first year ($350 p.a. thereafter)
75,000 Bonus Qantas Points & First-Year Annual Fee Discount
Get 75,000 bonus Qantas Points when you meet the spend requirement, a first-year annual fee discount and complimentary travel perks.
ANZ Low Rate
12.49% p.a.
0% p.a. for 30 months
$0 annual fee for the first year ($58 p.a. thereafter)
0% Balance Transfer Offer & $0 First-Year Annual Fee
Save with 0% p.a. on balance transfers for 30 months (with no BT fee) and $0 first-year annual fee. Plus a 12.49% p.a. purchase interest rate.
Citi Rewards Card - Flybuys Offer
21.49% p.a.
0% p.a. for 15 months with 1% balance transfer fee
$49 annual fee for the first year ($149 p.a. thereafter)
100,000 Bonus Flybuys Points
Get 100,000 bonus Flybuys points (worth $500 Flybuys dollars) when you spend $3,000 in the first 90 days. Plus, a $49 first-year annual fee.
Westpac Low Rate Card
13.74% p.a.
0% p.a. for 28 months with 1% balance transfer fee
$0 annual fee for the first year ($59 p.a. thereafter)
$0 First-Year Annual Fee & 0% Balance Transfer Offer
Save with a $0 annual fee for the first year, plus, a 0% interest rate on balance transfers for 28 months.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
20.74% p.a.
0% p.a. for 26 months
$64 annual fee for the first year ($129 p.a. thereafter)
$129 Gift Voucher & Balance Transfer Offer
Get 0% p.a. on balance transfers for 26 months, a reduced 1st year annual fee & $129 Virgin Australia Gift Voucher yearly.
Bankwest Breeze Classic Mastercard
0% p.a. for 15 months, reverts to 9.9% p.a.
0% p.a. for 15 months
$0 annual fee for the first year ($49 p.a. thereafter)
0% Purchase Rate & Balance Transfer Offers
Save with 0% p.a. on purchases and balance transfers for 15 months (with no BT fee). Plus, a $0 first-year annual fee.
Citi Rewards Card - Points & Gift Card Offer
21.49% p.a.
0% p.a. for 15 months
$49 annual fee for the first year ($149 p.a. thereafter)
90,000 Citi Rewards Points and $100 Coles eGift Card
Receive 90,000 bonus Citi reward Points (worth $400 in gift cards) and a $100 Coles eGift Card when you spend $3,000 in the first 90 days.
St.George Vertigo Classic
13.99% p.a.
0% p.a. for 28 months
$55
0% Balance Transfer Offer
Enjoy a 0% interest rate on balance transfers for 28 months, with no balance transfer fee.
Bankwest Zero Platinum Mastercard
14.99% p.a.
0% p.a. for 26 months with 2% balance transfer fee
$0
No Annual Fee & 0% Balance Transfer Offer
Get 0% p.a. on balance transfers for 26 months (with a 2% BT fee), ​an ongoing $0 annual fee and 0% foreign transaction fees.
Citi Rewards Card - Velocity Points Offer
21.49% p.a.
0% p.a. for 15 months
$99 annual fee for the first year ($199 p.a. thereafter)
100,000 bonus Velocity Points
Enjoy 100,000 bonus Velocity Points when you spend $3,000 in the first 90 days. Plus, complimentary travel and purchase insurance.
Qantas Premier Platinum
19.99% p.a.
0% p.a. for 18 months with 1% balance transfer fee
$225 annual fee for the first year ($299 p.a. thereafter)
80,000 Bonus Points & 80 bonus Status Credits
Enjoy 80,000 bonus Qantas Points when you spend at least $4,000 within the first 3 months, 80 bonus Status Credits on eligible spend, plus a discounted $225 first-year annual fee.
Coles Rewards Mastercard
19.99% p.a.
0% p.a. for 18 months with 1.5% balance transfer fee
$0 annual fee for the first year ($99 p.a. thereafter)
20,000 Bonus Flybuys Points & $0 First-Year Annual Fee
Get 20,000 bonus Flybuys points (worth $100 at Coles), a $0 first-year annual fee and an 18-month balance transfer offer. Ends 30 June 2021.
Bendigo Bank Low Rate Credit Card
11.99% p.a.
0% p.a. for 24 months with 2% balance transfer fee
$45
Long-Term 0% Balance Transfer Offer
Save with 0% p.a. on balance transfers for 24 months (with a 2% BT fee). Plus a 11.99% p.a. purchase interest rate. Ends 30 June 2021.
Citi Clear Card
14.99% p.a.
0% p.a. for 15 months
$49 annual fee for the first year ($99 p.a. thereafter)
$250 Cashback & 0% Balance Transfer Offers
Get $250 cashback when you spend $3,000 within the first 90 days. Plus, a 0% balance transfer offer and first-year annual fee discount.
Latitude Gem Visa
24.99% p.a.
$99
0% Purchase Rate Offer
Enjoy 0% p.a. interest on purchases over $250 for 6 months, optional shopper's protection insurance and the convenience of Samsung Pay.
ANZ Platinum Credit Card
0% p.a. for 17 months, reverts to 20.24% p.a.
20.24% p.a.
$0 annual fee for the first year ($87 p.a. thereafter)
0% Purchase Offer & $0 First Year Annual Fee
Receive a 0% purchase rate offer for 17 months and a $0 first-year annual fee. Plus, complimentary overseas travel and medical insurance.
St.George Amplify Platinum - Qantas
19.74% p.a.
0% p.a. for 15 months with 1% balance transfer fee
$99
Balance Transfer Offer & 60,000 Bonus Points
Earn 60,000 bonus Qantas Points, plus enjoy 0% p.a. on balance transfers for 15 months with a 1% BT fee.
MoneyMe Freestyle Virtual Mastercard
16.99% p.a.
$0
Approval within minutes
Get approved quickly online and start using your card right away. Plus, the ability to transfer money to a bank account.
Westpac Altitude Platinum Qantas
20.49% p.a.
0% p.a. for 18 months with 1% balance transfer fee
$149 annual fee for the first year ($200 p.a. thereafter)
60,000 Bonus Qantas Points & First-Year Annual Fee Discount
Get 60,000 bonus Qantas Points when you spend $3,000 within 90 days. Plus, a first-year annual fee discount and a 0% balance transfer offer.
American Express Cashback Credit Card
20.74% p.a.
$120
Up to 6% cashback
Earn 1% cashback per $1 dollar spent on your everyday purchases. Plus, an additional 5% for the first 3 months (up to $200).
American Express Qantas Business Rewards Card
N/A
$450
150,000 Bonus Points Offer & $450 Qantas Flight Voucher
ABN holders w/ $75,000 revenue. 150,000 bonus Qantas Points and a $450 Qantas Flight Voucher when you spend $3,000 within the first 2 months. Ends 30 June 2021.
NAB Low Rate Credit Card
12.99% p.a.
0% p.a. for 26 months with 2% balance transfer fee
$0 annual fee for the first year ($59 p.a. thereafter)
0% Balance Transfer Offer & $0 First-Year Annual Fee
Get a 0% interest rate on balance transfers for the first 26 months (with 2% BT fee). Plus, save with a $0 first-year annual fee.
Citi Premier Card
21.49% p.a.
0% p.a. for 6 months
$150 annual fee for the first year ($300 p.a. thereafter)
130,000 bonus Citi Reward Points & First-Year Annual Fee Discount
Enjoy 130,000 bonus points (worth $450 in eGift cards) when you spend $4,000 within the first 90 days. Plus, a first-year annual fee discount.
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*The credit card offers on this page are chosen from a range of credit cards available to us and are not representative of all the products available in the market. The use of the terms "best" and "top" are not product ratings and are subject to our disclaimer. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

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