Australians love their credit cards. We have 13.5 million of them! And Finder research shows that 30% of us rely on a credit card to manage our finances.
Credit cards are incredibly useful and rewarding if you pay one off on time and avoid high interest charges. If you use your card irresponsibly you can end up with thousands of dollars in card debt that just grows bigger with the high interest charges on top.
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If you just want to tap and pay and keep life simple, a debit card is just fine for your everyday spending. Credit cards
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are complicated. They have interest rates. They have annual fees. A debit card keeps things nice and simple. But
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in the right hands, a credit card is a powerful tool. I think there are three types of person who could really benefit
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from thinking about getting a credit card. Number one, if you're someone who spends and earns a lot of money, a credit card
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could be pretty rewarding. The best credit cards on the market are very rewarding. They offer you lots of perks
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like frequent flyer points or reward points. And you can redeem those when you're doing online shopping or by getting
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reward flights through Quantas or Velocity. But these cards of course charge higher annual fees. And they
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really are cards that are aimed at bigger spenders because the more you spend, the more you get out of those
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credit cards. They're really not for people on low incomes and they're really for people who are happy to pay a higher
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fee because the benefits they get from their spending outweigh that card's fee. The second kind of person who can
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benefit from a credit card is someone who's already struggling with their existing credit cards. Now, I know it
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seems crazy for someone like that to get a new credit card, but there's one
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exception, and that's a balance transfer offer. With these credit cards, you can take all your existing unpaid card
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balances and move them onto a new card and start paying off that balance with a
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special 0% interest rate offer. This helps you pay off your debt without having to worry about interest charges
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piling up on top. The main thing to watch out for with the balance transfer offer is the balance transfer fee, which
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is charged as a percentage of your total balance. And you also have to make sure you pay this balance off before the
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balance transfer offer ends because otherwise you'll get charged interest again and the whole cycle will just
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continue. And the last kind of person who could use a credit card is someone who needs a bit more flexibility than
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their debit card. Debit cards are great. They're very simple. You spend your own
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money. There's no fees. There's no interest rate. It's all very, very simple. But once you spend all your
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money, it's gone. Whereas a credit card gives you greater flexibility because you can spend up to your approved credit
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limit before you have to worry about paying it back. It's much more flexible for people covering their expenses
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monthto month. And if you find the right kind of credit card, like one with a low or zero annual fee, this can actually be
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an incredibly cheap option that still gives you lots of great flexibility. The trick with any credit card is to make
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sure you stay on top of those repayments because interest charges on a credit
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card add up really quickly. So, whatever kind of credit card you get, make sure
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you stay on top of those repayments, pay it off each month, and avoid getting
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charged interest. You can learn more about credit cards right now at Finder.
Getting a credit card and using it responsibly is a simple way to improve your credit score. The card is added to your credit report. Making payments on time makes you look like a responsible cardholder.
Finder research shows 40% of Australians got their most recent credit card for emergencies, making it the most popular reason to get one.
If you suddenly need $3,000 to fix your car today but only $2,000 in your bank account until next week, then a card is a lifesaver.
If you repay the total amount shown on your credit card statement, you'll typically get interest-free days for purchases. This gives you a way to use a credit card without paying any interest.
Credit cards have more protections than debit cards. If something goes wrong or there's a fraudulent transaction on the card, it's easier to fix because the funds used for purchases are taken from the credit limit rather than your bank account.
Most credit cards offer security monitoring for your account. Some cards also let you put a temporary lock on your account, and you can also cancel a card at any time if it's stolen.
Rewards are the second-most popular reason people get a credit card, according to Finder research. Most rewards credit cards earn points for every dollar you spend. Many cards also offer sign-up bonuses with tens of thousands of points.
If you pay as you go or repay the total amount on each statement, a reward or frequent flyer credit card can also be interest-free. But you do also need to check if it's worth paying the annual fee.
More premium credit cards have other perks that help you save on costs or unlock exclusive experiences. This includes international travel insurance and airport lounge access and complimentary travel or flight benefits.
Credit card benefits and drawbacks
"I actually cancelled my credit card when I applied for a home loan several years ago. It made sense at the time because I barely used it and I was in serious saving mode. A few years later and with a bigger family I'm spending so much more on essentials. Now I use a credit card to earn frequent flyer points to cover family holidays. It's well worth it, and I can now afford a card with a high-ish annual fee."
A credit card lets you spend money you don't have. That's fine if you pay the card off each month. But if you fall behind or just forget to pay it off, you'll get charged interest on your unpaid balance.
Credit card interest rates are also higher than a lot of other loans, ranging from around 8% to 28% for purchases (they can be higher for cash advances). So if you spend more than you can afford to pay back on a credit card, you could end up in serious debt.
And unlike loans, there's no end date on a credit card balance. Even a small debt gets very expensive if you take years to pay it off.
A history of responsibly using a credit card is proof you're a good borrower. But credit cards also affect how much you can borrow for a home loan.
The higher your credit limit (or limits if you have more than one card), the bigger the impact on your borrowing power.
Before you apply for a home loan you can lower your credit limits and avoid taking out a new card.
Businesses are allowed to apply a surcharge for both debit and credit cards, based on what it costs the business to process the transaction. But credit card transactions cost more to process.
According to the Australian Competition and Consumer Commission (ACCC), Mastercard and Visa debit cards incur fees of around .05% to 1%.
But Mastercard and Visa credit card transactions can incur charges between 1% and 1.5%. American Express transactions also cost businesses more to process, so surcharges for these cards could be even higher.
Credit cards give you access to funds you may not already have available, which makes it easy for some people to overspend.
As well as unplanned spending, the incentive to get rewards can lead to spending more than you normally would. This increases the risk that you won't be able to repay the total amount owed on your credit card when you get a statement. And that can lead to interest charges, as well as debt.
Answering these questions allows you to focus on what you want a credit card for and how well you would manage it.
We currently don't have that product, but here are others to consider:
How we picked these
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You deserve the best credit card. Let us help you find it.
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