Understand what you can expect from credit card features and how you can compare them to find a credit card that suits your needs.
All credit cards work in a similar way, allowing you to spend up to a certain amount and then pay it back over time, usually with interest charges. However, what often sets them apart are the additional features that allow you to save money or get extra value from the card. Some of these perks include interest-free days, introductory low interest rate promotions, rewards programs and more.
Understanding these different types of features (whether standard or unique to the card) can help you choose a credit card that’s right for your circumstances, and use it in a way that’s affordable. Here, we look at what you need to know about both the basic and additional features that credit cards offer.
Credit card features to compare
These features are the nuts and bolts that are common to all credit cards.
Credit limits
When you apply for a credit card, you can choose a credit limit or elect to get the maximum amount of credit available to you. In general, the more you earn, the more you can borrow.
The minimum credit limit of low rate interest rate cards is typically $500 and requires a minimum annual income of $15,000 to service. Top-tier platinum and black credit cards have a maximum credit limit up to hundreds of thousands of dollars. You can apply for a higher credit limit (or a lower one) once you have your credit card, though the bank will consider your current credit limit and your ability to repay if you do apply for more credit.
As well as physically using your credit card for purchases and withdrawals, you can use upwards of 70% of your available credit limit for a balance transfer. If you’ve ordered an additional card for a family member or employee, the extra cards will all share the account credit limit.
Statements and credit card repayments
Common wisdom is to pay your credit card in full each month. However, credit card issuers also list a minimum repayment amount worth 2-3% of the closing balance. If you only pay this minimum amount, it can take years to pay off your credit card and cost hundreds or thousands of dollars in interest. Meanwhile, if you pay your balance in full, you can avoid interest charges and get interest-free days on purchases for future statement periods.
Your credit card statement includes details of how long it would take to pay off your balance if you only made the minimum payment each month. It also has information about how to make credit card repayments. Two common methods include BPAY and bank transfers. Statements can be emailed or accessed via Internet banking. They can also be physically mailed to you, although there may be an additional fee for printed statements.
Interest rates
There are two main credit card interest rates: the purchase and the cash advance rate. The purchase interest rate applies to most everyday transactions and ranges from around 9% p.a. to 22% p.a. Low rate credit cards have the lowest standard variable interest rates for purchases.
The cash advance interest rate applies when you use your credit card to withdraw cash from an ATM, or for other “cash equivalent” payments such as buying foreign currency or gambling. Cash advance interest rates are almost always higher than the purchase rate, typically around 19-22% p.a. for most cards. Cash advances are also ineligible for interest-free days.
Interest-free days
Nearly all credit cards offer up to a number of interest-free days on purchases, such as “up to 55 days”, when you pay your card off in full by the statement due date. If you meet this requirement, the interest-free period begins on the first day of your statement cycle and typically ends on the statement due date.
If you don’t pay the full amount off by the due date, the purchase rate of interest will apply to transactions made during the previous statement period, from the day that each transaction was made. You may then have to wait another statement cycle to be eligible for interest-free days again.
Promotional offers
Promotional or introductory offers are designed to provide benefits to new customers for a limited time. Credit cards can have more than one of these value-adding deals:
- Balance transfer offers. Move your debt to a new credit card and get a 0% interest rate for an introductory period. You can save money on interest repayments and use the extra money to pay off your credit card sooner. At the end of the promotion, a standard variable rate will apply to any debt remaining from the transfer (typically the cash advance rate or purchase rate for that card).
- Purchase rate offers. Pay low or no interest for an introductory period when you use the card to shop and pay for services, like when on holiday. Be sure to pay back what you’ve spent by the end of the intro period – your credit card repayments will increase if you’re carrying an unpaid balance.
- Bonus points offers. Sign-up bonuses can come as frequent flyer or rewards points and can equal the price of a couple of domestic trips. Bonus points offers can be for a limited time only.
- Reduced or $0 annual fees. No annual fee credit cards can often feature competitive balance transfer and purchase rate offers. Be cautious of no annual fee in the first year credit cards with rewards. You must spend much more in the second year to break even on the cost of credit card ownership.
Security and fraud protection
Financial institutions protect your account in a couple of ways. You’ll need to have kept your account information private and must not have contributed to the loss to be eligible to claim for credit card fraud:
- No liability guarantees. Credit card transactions are protected by the card scheme and the issuer. Visa, Mastercard and American Express guarantee you won’t be liable for unauthorised transactions.
- Anti-fraud programs. Banks, credit unions and credit card issuers all have teams to monitor your account for suspicious activity in real time. Your card can be blocked and any lost funds recovered.
Contactless payments
Instead of swiping or inserting your credit card at the checkout, you now have the following tap-and-go options:
- PayPass and payWave. Tap your card against the point of sale terminal to make purchases under $100 in seconds. Like all purchases, PayPass and payWave transactions are guaranteed by the card scheme (Visa, Mastercard or American Express).
- Mobile contactless payments. Mobile payments technology and digital wallets let you make a payment either by swiping a badge attached to the back of your phone or using your device’s NFC. As well as internal mobile contactless payment technologies offered by banks, Australian cardholders can also use Apple Pay, Google Pay and Samsung Pay to make mobile payments.
Rewards and frequent flyer programs
Some credit cards let you earn rewards points for every dollar you spend, which can be an easy way to rack up rewards for using your card. These cards generally come with higher annual fees and interest rates, though. So it’s important to compare your options and make sure the value of the rewards program outweighs the costs.
As there are different types of rewards credit cards on the market, you should be able to find one that rewards how you spend on your card. The three main types to consider include:
- Rewards cards. Rewards credit cards are linked to the credit card issuer’s rewards program, like CommBank Awards or Westpac Amplify Rewards, and usually earn points for every $1 spent. These points can then be redeemed for flights with partner airlines, gift cards, cashback and other merchandise. Some rewards credit cards give you the option of converting your points to partnered frequent flyer programs. While this gives your rewards more flexibility, the conversion rate from rewards points to frequent flyer points is less competitive than if you were earning them on a frequent flyer credit card.
- Frequent flyer cards. Frequent flyer credit cards are directly linked to an airline’s loyalty program, for example Velocity or Qantas. These cards earn frequent flyer points per $1 spent, and may offer bonus points for spending with the affiliated airline or other program partners. They often also feature other travel-related perks, such as complimentary flights and airport lounge access.
- Store credit cards. Some rewards credit cards are directly linked to particular stores, brands or shopping loyalty programs. This category is currently dominated by the flybuys rewards program, but also includes David Jones credit cards, Myer credit cards and Woolworths credit cards. These cards may also offer other benefits, such as complimentary delivery for online shopping, in-store gift-wrapping services or VIP events.
Complimentary insurances
Premium gold, platinum and black credit cards feature complimentary insurances for when you travel and make important purchases. The range of coverage varies but often includes:
- International travel insurance. Generally provides hospital and medical cover as well as luggage contents insurance for you and your family when travelling overseas. Usually you are eligible for cover when you charge the cost of your overseas travel ticket to an eligible credit card with complimentary international travel insurance.
- Interstate flight inconvenience insurance. Covers the cost of domestic flight delays and cancellations for domestic trips 7-14 days in length.
- Purchase protection. Covers items you buy with the card anywhere in the world for theft, loss and damage for up to three months. There’s usually a maximum limit on the benefit that the insurer will pay in a 12-month period.
- Concierge services. A credit card concierge can take the stress out of last-minute reservations and bookings when you’re at home or abroad. This feature is included with platinum and black credit cards.
Standard costs
Make sure you also consider these common costs of credit card ownership:
- Annual fee. Charged to the first statement period, the annual fee will accrue interest at the purchase rate if you don’t pay it in the first month. Compare no annual fee credit cards if you want to cut costs and don’t care much for insurance extras or a high reward earn rate.
- Interest rates. Remember that there are different interest rates for cash and purchase transactions. Interest is based on your daily balance and charged to your account monthly. It is deducted from your available credit limit every month.
- Cash advance fees. As well as high interest charges, cash advance transactions such as paying some bills and ATM withdrawals attract a cash advance fee worth around 2-4% of the total transaction amount.
- Late payment fees. A fee for when you don’t make at least the minimum repayment on your credit card.
- Overlimit fees. Look to see whether the credit card company has waived overlimit fees when you compare credit cards.
- Additional cardholder fee. You may pay an additional annual fee for each supplementary card issued.
Whether you’re looking for a new card or want to get more out of the one you already have, it’s important to understand the range of features so that you can make your credit card work for you. If you have a question about credit card features and using a credit card, ask us using the form at the bottom of this page.
