australian-credit-cards

Australian Credit Card Guide

Looking for a credit card and don’t know where to start? Learn everything you need to know with this Australian Credit Card Guide.

Whether you’re a seasoned card user or a newbie to the whole credit card game, it’s good to go over the basics. This guide will tell you all you need to know about how credit cards work, how much they can cost, how to compare cards for your user personality and how to apply for one.

What is a credit card?

Essentially, when approved, a credit card is issued in your name (the primary cardholder) with a specified credit limit for your usage. This means you can only spend up to that amount before incurring an overlimit fee.

At the end of each statement period (which is usually around a month long), you will have to make a payment towards the charges on your account. You can choose to pay some or all of this balance, as long as you meet the minimum 2-3% payment amount. But if you only pay off some of the balance, you will be charged interest on the remainder.

If you want to share your credit card account, you can request to add an additional cardholder who will not be liable for the account. In some cases, you may also apply jointly with someone for a joint-account credit card where you both share equal account status and liability.

What features come with a credit card?

  • Rewards programs. Rewards credit cards are a popular category of credit cards because of the rewards they let you earn. Typically a rewards program lets you earn one point per $1 spent, and allows you to redeem your collected points for goodies like flights, flight upgrades, hotel stays, shopping vouchers, gift vouchers, electronics and a wide array of other goods and services. Some cards also offer cashback as a rewards option.
  • Interest-free days. Most credit cards offer interest-free days on purchases, e.g. “up to 55 interest-free days”. With this feature, you must be careful that you are not carrying an outstanding balance on your card, because this will usually disqualify you from enjoying the interest-free period. Also note that the interest-free period applies only to purchases and not cash advances like ATM withdrawals.
  • Promotional offers. Credit card promotions offer attractive perks, such as 0% purchase interest for 15 months or 0% balance transfer interest for up to 20 months. Some even offer both 0% balance transfer and 0% purchase promotional periods. The key is to know when your 0% interest promotion ends, and what the rate reverts to. Other offers include bonus points giveaways. For example, you could receive 40,000 bonus reward points when you spend a specific amount of money in the first few month. The key there is to know what you need to do to unlock your reward, and when you must do this by. Check out our compare credit card deals guide for more information.
  • Complimentary insurance. Many credit cards these days come with complimentary insurance, including travel insurance (usually international, but sometimes domestic too), purchase protection and extended warranty. It’s always good to find out which insurance your card entitles you to, and what’s required to get coverage. You’ll usually need to pay for related items with your credit card. For example, you may have to pay for your airfares using a credit card to get complimentary travel insurance.
  • Other services. The Visa, MasterCard and American Express card networks all have complimentary services and offers available to cardholders with co-branded credit cards, such as Visa Entertainment, MasterCard Priceless Cities and Amex Offers. The higher-end credit cards usually offer more services, including concierge services, airport chauffeuring services and airport lounge access.

How much does it cost to use a credit card?

The cost of a credit card largely depends on what type of card you have, what fees it charges, and how you use it. It is possible for a credit card to be completely free, but consider some of the major costs that come with most cards:

  • Annual fee. This is the fee you pay yearly for the card, and typically increases with the type of card you have and the number of features. For instance, platinum and black cards cost more than regular cards, as do rewards cards. There are many no annual fee credit cards out there though, which you should compare for their other features.
  • Interest rates. This is an important factor to consider when choosing a card, since this can potentially amount to your biggest cost if you carry a balance. However, it can be far less of a consideration if you are disciplined and able to fully pay off your account balance each month. Also consider that you may be paying a higher annual fee for lower interest rates.
  • Cash advances. Cash advances refer to ATM cash withdrawals or “cash equivalent transactions” such as when you buy traveller’s cheques or casino chips with your credit card. Cash advances attract a cash advance fee (which can be a flat fee or percentage of your transaction) as well as a higher cash advance interest rate which is calculated from the day your cash advance transaction is processed. Cash advances are not eligible for interest-free days.
  • ATM fees. On top of your cash advance fee and interest, ATM withdrawals on your credit card can be charged ATM fees too, particularly if you’re using an ATM belonging to another bank or when you’re overseas.
  • Overlimit and late payment fees. When you exceed your credit limit, you may be charged an overlimit fee if your card isn’t declined at the point of payment. Failing to make your minimum repayment by the statement due date also results in late payment fees, which also gather interest when unpaid.
  • Balance transfers. Balance transfers can be a great way to consolidate debt, but may come with a balance transfer fee worth around 1-3% of the balance transfer amount. You should factor in this cost when considering a balance transfer, as well as the revert rate at the end of your balance transfer promotional period. This is usually the same rate as the cash advance interest rate, which means interest charges could quickly add to any balance remaining at the end of the promotional period.

Revealed: The cheapest credit cards

How do I make credit card repayments?

Your credit card statement will outline the charges made during that statement period, the minimum repayment required and the due date for a payment. You can then easily make your repayments online via funds transfer, BPAY, or in person at a bank branch. Your repayments always pay off the debt segment with the highest interest rate first, i.e. cash advances or balance transfers before purchases.

If you don’t pay your monthly balance in full, it’s important to understand how minimum repayment calculations work. Simply put, making the minimum repayment is not wise because that amount is usually only 2-3% of your entire balance. At this rate, paying back your debt would take exponentially longer and cost you much more in interest fees than if you’d paid more of your balance each month. This is because carrying an outstanding balance on your credit card leads to compounding interest (ie. interest charges on your interest charges). Over time, this can result in hefty interest fees worth more than your original debt.

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How do I compare credit cards?

There are quite a few credit card types to choose from, and numerous card providers offering each type. There are rewards credit cards, frequent flyer credit cards, balance transfer credit cards, no annual fee credit cards, just to name a few. To figure out which type is most suitable for you, you should consider your needs in relation to the card type’s features and fees. Figuring out which cardholder type you are can also tell you which credit card type is most compatible for you.

What type of credit cardholder am I?

Type of credit cardholderCharacteristicTheir card type
The regular spender
  • You're someone who generally uses your card every day
  • You use your card instead of money every time (topping up the petrol, at the shops or getting a haircut).
  • It doesn’t matter because you also pay your balance in full each month.
  • You will most likely benefit from basic reward-style cards (regular spending should translate into a nice amount of points).
  • You don’t need to worry about interest rates since you pay your monthly bill in full, so you can afford to go with high interest rates as long as the annual fee is low.
The high flyer
  • You earn a very good salary and treat yourself to the occasional large purchase.
  • You globetrot a fair bit on business, and you understand that you get what you pay for in life.
  • You also have an exceptional credit history with no defaults or misdemeanours on file.
  • You would benefit greatly from using frequent flyer rewards cards.
  • Apart from earning points really fast and jumping status tiers quickly too, you can enjoy the free airport lounge treats and other exclusive premium rewards.
  • Annual fees won’t be much of a concern to you either since you don’t mind paying for your perks.
The everyday borrower
  • You generally use your card when cash-strapped.
  • If you need to make a purchase before pay day, you find that your credit card is always the best bet.
  • Unfortunately, you struggle to repay your card balance in full each month.
  • Interest rates are important to the everyday borrower.
  • You’ll want to look out for the card with the cheapest possible rate of interest in case you can’t pay your balance in full each month.
  • Credit cards with long interest-free periods will give you more time to pay things off.
The “only in an emergency” user
  • This type of credit card user barely lets their card see the light of day.
  • Their credit card’s really only there to be used in a dire emergency, and even then the balance is usually repaid sooner rather than later.
  • A very basic card will almost certainly do the job. If this is you, look for a standard credit card with a very low or $0 annual fee.
  • A card that is used so infrequently will present no benefit from having a rewards program that relies on you spending regularly.

How to apply for a credit card

Applying for a credit card these days can be as simple as getting online and filling out a form.  You can usually do it in 10-15 minutes. Just be sure that you meet the eligibility requirements and have the required documents ready for submission. Here are the typical requirements:

Eligibility requirements

  • Age. You must usually be above 18 to apply, although some cards make exceptions.
  • Residency. You must be an Australian citizen or resident, although some cards allow visa holders to apply.
  • Income. This is specific to each credit card, and can be as low as $15,000 or as high as $150,000.
  • Credit history. All credit providers commonly require that your credit score be very good or excellent. If you’re unsure about your credit history, it’s worth requesting a free copy of your file and looking at your credit rating before you apply for a new card.

Required information

  • Personal details. This includes your name, date of birth, ID, marital and residency statuses, address, contact details and referee details.
  • Financial information. This includes your monthly income and other income sources, monthly expenses, assets and liabilities.
  • Employment. You will need to provide details of your current employment, including your employer address, manager’s name and contact details for verification purposes.
  • Card preferences. This includes your desired credit limit, balance transfer request and details of any additional cardholders where applicable.

Even if you already have a bunch of cards, you might realise after reading this article that you need a different type of card to suit your needs. It’s not too late to get that new card and cancel the existing ones if they’re not working for you. Credit cards can be a drain on your resources but they really don’t have to be. Research and compare your options so that your credit card choice will benefit you more than it costs, bearing in mind your specific needs and spending habits.

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American Express Essential Credit Card
American Express Essential Credit Card

Interest rate

14.99

Annual fee

0
ME Bank frank Credit Card
ME Bank frank Credit Card

Interest rate

11.99

Annual fee

0
HSBC Platinum Credit Card
HSBC Platinum Credit Card

Interest rate

19.99

Annual fee

149

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2 Responses to Australian Credit Card Guide

  1. Default Gravatar
    Christine | September 19, 2013

    In the UK ‘Section 75′ of the Consumer Credit act means a purchaser can claim a refund from the credit card provider against the seller – see extract below. Does a similar law apply in Australia?

    “When you use your credit card to pay for goods or services between £100 and £30,000, Section 75 holds your credit card provider ‘jointly and severally’ responsible for your purchase. This means that you have the right to claim a refund from your credit card provider if there is a problem with the goods or services you ordered.
    There is no time limit for making a Section 75 claim, however if you’re unhappy with how the claim is handled you have just 6 years in which to pursue your credit card provider through the courts.”

    • Staff
      Jacob | September 19, 2013

      Hi Christine.

      Thanks for your question.

      It works a little differently in Australia. The merchant is liable not the bank if the customer requests a charge back. For instance, if the cardholder does not receive the goods or services, liability rests with the merchant. There are a number of reasons why a charge back can occur, you can find more information in your credit issuer’s merchant services guide.

      Is this what you were referring to?

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