Credit card advantages and disadvantages

Thinking about getting a credit card? These pros and cons will help you decide if one fits with your goals.

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Credit cards are handy for shopping, covering unexpected costs and earning rewards. They also influence your credit score (for better or worse) and come with a risk of debt.

So if you're on the fence about credit cards, a simple place to start is by looking at the key advantages and disadvantages – based on your own values.

credit card advantages and disadvantages infographic

9 advantages of using a credit card

1. Security

Most credit cards offer 24/7 security services to keep your account safe. All Visa, Mastercard and American Express cards also offer zero liability policies to help you get money back from any fraudulent transactions. It's also easy to cancel a lost card – some even let you put a temporary lock on the account while you look for it.

2. Building credit

Your credit card account details are added to your credit file. If you make payments on time and keep your account in good standing, it will help you build up a good credit score – which could increase your chance of approval for other products such as a car loan or a mortgage.

This sets credit cards apart from debit cards and a lot of buy now pay later services, including Afterpay. If you're trying to choose between a credit card and buy now pay later, the possible impact on your credit history is a key detail to think about.

3. Interest-free days

Most credit cards offer interest-free days on purchases when you pay your full balance by the due date on each statement. This gives you a way to avoid interest charges on your credit card, which also helps keep the costs down.

In 9 years I've never paid credit card interest – here's how

4. Earning points

Reward and frequent flyer credit cards give you a way to earn points on your everyday spending, including supermarket shopping, dining and travel bookings. You can redeem your points for rewards such as flights, hotel stays, gift cards, cashback on your account or even a coffee machine (depending on the rewards program).

Some of these cards also come with big bonus points offers that give you enough to get the rewards you want even faster.

5. Chargebacks – getting your money back

If you have problems with a business that won't give you a refund, you could request a chargeback through your credit card company.

6. Overseas spending

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. Consolidating and paying 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

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? What to look at first.

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

When you’re thinking about getting a credit card, it’s important to consider the benefits and disadvantages they offer based on your own circumstances. This helps you decide if a card is right for you – and what type of card to choose.

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 30 months
$0
0% Balance Transfer Offer & $50 Kogan.com Credit
Save with a $0 annual fee and a 0% introductory rate on balance transfers. Plus, earn $50 Kogan.com Credit and uncapped rewards points.
St.George Vertigo Card
13.99% p.a.
0% p.a. for 32 months
$0 annual fee for the first year ($55 p.a. thereafter)
Long-Term 0% Balance Transfer Offer & $0 First-Year Annual Fee
Get a 0% interest rate on balance transfers for 32 months (with no balance transfer fee) and a $0 annual fee for the first year.
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)
100,000 Bonus Qantas Points & First-Year Annual Fee Discount
Get 100,000 bonus Qantas Points when you spend $4,000 in the first 90 days and a first-year annual fee discount.
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.
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.
Citi Clear Card - Balance Transfer Offer
14.99% p.a.
0% p.a. for 36 months
$99
Long-Term 0% Balance Transfer Offer
Offers 0% p.a. on balance transfers for 36 months with no balance transfer fee. Plus, complimentary insurance covers.
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).
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
20.74% p.a.
0% p.a. for 28 months
$0 annual fee for the first year ($129 p.a. thereafter)
$0 First-Year Annual Fee & Balance Transfer Offer
Get 0% p.a. on balance transfers for 28 months (with no BT fee). Plus, $0 annual fee in the first year.
NAB Low Rate Credit Card
12.99% p.a.
0% p.a. for 32 months
$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 32 months (with no BT fee). Plus, save with a $0 first-year annual fee.
Bankwest Zero Platinum Mastercard
14.99% p.a.
0% p.a. for 34 months with 2% balance transfer fee
$0
No Annual Fee & 0% Balance Transfer Offer
Get 0% p.a. on balance transfers for 34 months (with a 2% BT fee), ​an ongoing $0 annual fee and 0% foreign transaction fees.
Westpac Low Rate Card - Cashback Offer
13.74% p.a.
6.99% p.a. for 12 months
$0 annual fee for the first year ($59 p.a. thereafter)
$400 Cashback & $0 First-Year Annual Fee
Get $400 cashback when you spend $4,000 on eligible purchases within the first 4 months. Plus, a $0 first-year annual fee.
ANZ Frequent Flyer Platinum
20.24% p.a.
20.24% p.a.
$0 annual fee for the first year ($295 p.a. thereafter)
70,000 Bonus Points & $0 First-Year Annual Fee
Now offering Cashrewards Max. Receive 70,000 bonus Qantas Points when you spend $2,500 on eligible purchases within 3 months. Plus, a $0 first-year annual fee.
Qantas Premier Platinum
19.99% p.a.
0% p.a. for 18 months with 1% balance transfer fee
$199 annual fee for the first year ($299 p.a. thereafter)
90,000 Bonus Points & First-Year Annual Fee Discount
Earn 90,000 bonus Qantas Points when you spend $3,500 in the first 3 months and save with a reduced first-year annual fee.
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
Now eligible for Cashrewards Max. 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.
Bendigo Bank Low Rate Credit Card
0% p.a. for 18 months, reverts to 11.99% p.a.
13.99% p.a.
$45
Long-Term 0% Purchase Offer
Save on interest costs with 0% p.a. on purchases for up to 18 months (reverts to 11.99% p.a.). Plus, a $45 annual fee.
Latitude GO Mastercard
19.95% p.a.
$107.40
Up to 55 days Interest-free
Choose from 3 interest-free payment plans and and save with a $0 monthly fee when you carry a balance of less than $10.
Citi Premier Card - Cashback Offer
21.49% p.a.
0% p.a. for 6 months
$150 annual fee for the first year ($300 p.a. thereafter)
$600 Cashback & First-Year Annual Fee Discount
Receive $600 cashback when you spend $4,000 through Apple Pay or Samsung Pay in the first 90 days. Plus, save with a $150 first-year annual fee discount.
Citi Clear Card - Cashback Offer
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 in the first 90 days. Plus, free wine when you dine and purchase insurance cover.
Citi Rewards Card - Purchase and Balance Transfer Offer
0% p.a. for 14 months, reverts to 21.49% p.a.
0% p.a. for 14 months
$49 annual fee for the first year ($149 p.a. thereafter)
Long-Term 0% Purchase and Balance Transfer Offer
Save with 0% on purchases and balance transfers for 14 months with no balance transfer fee. Plus, $49 first-year annual fee.
St.George Vertigo Card - Purchase Offer
0% p.a. for 18 months, reverts to 13.99% p.a.
$0 annual fee for the first year ($55 p.a. thereafter)
Long-Term 0% Purchase Offer & $0 First-Year Annual Fee
Save with a 0% interest rate on purchases for 18 months and a $0 annual fee for the first year.
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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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