Credit Cards


Credit Cards in 2020


A credit card is a payment card provided by a bank or other lender, which allows you to make purchases using a pre-approved line of credit. Interest is accrued on the outstanding balance, and both are repaid in regular instalments. Credit card interest rates are determined by the lender and the type of card you apply for.


How do they work?


A credit card works in a similar way to a debit card when making purchases in stores or online. The main difference between the two is that a debit card uses available funds in your bank account, while a credit card allows you to borrow money and repay the amount at a later date. 

When you compare credit cards, you will see each card has two main rates. Each time you use your card, the relative rate is applied to your purchase or withdrawal:


  • Purchase Rate - The interest rate applied to purchases made with the card. 
  • Cash Advance Rate - The interest rate applied to cash withdrawals.

The lender will issue a statement each month, which indicates the outstanding balance, interest accrued, and your required minimum repayment amount. This amount is generally between 2 and 3% of the outstanding balance, plus any fees or other charges accrued.

Credit card payments automatically reduce the debt which accrues the highest amount of interest:

  • The card’s purchase rate is 12% 
  • The card’s cash advance rate is 22% 
  • You use the card to make purchases of $1,200 
  • This amount accrues 12% interest 
  • You use the card to withdraw $800 in cash 
  • This amount accrues 22% interest 
  • Your monthly repayments will be used to first reduce the cash advance amount, then the purchase amount. 

It’s important to understand both the purchase rate and cash advance rate before applying for a credit card, as higher rates may increase your minimum repayments.


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If you don’t pay the minimum amount, then you may be charged a fee and interest.


Credit card requirements


Qualifying criteria for credit cards varies between cards and issuers. To qualify for the majority of credit cards in Australia, you need to meet some basic requirements:

  • At least 18 years old 
  • Australian citizen or permanent resident 
  • Have a reliable source of income 
  • Have good or excellent credit history 

If you are a temporary resident, or have bad credit, you could still get approved for a credit card. The number of cards to choose from will be limited, however, and you may need to supply additional supporting documentation with your application.


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A credit card can be used to build your credit history - some cards even come with perks to reward spending.


How to apply for a credit card


You can apply for a credit card online, at a bank, and with certain businesses. A typical credit card application process can take between 15 and 20 minutes. As part of the application, you’ll need to provide the card issuer with supporting documentation. 

This is used to assess your ability to comfortably meet repayments, and to determine your credit limit, and may include:

  • Personal details 
  • Valid I.D. - such as a driver licence or passport 
  • Employment details - including your employment status, employer contact details, salary information, and payslips to verify your income. 
  • Your tax file number 
  • Details of your assets - such as your home and motor vehicle 
  • Details of your current expenses and other loans you may have

If you are self-employed, you will need to provide previous tax assessments instead of payslips. You may also need to provide information about your accountant. 

Before you apply, check your documents and ensure they are accurate. Incorrect information may cause delays in approval and, in some cases, lead to your application being declined. 

Once your application is submitted, it can take up to four weeks before your credit card is approved and ready for collection or delivery.


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A declined application could affect your credit score, and make it difficult to gain approval for a loan or credit card in the future.


How to compare credit cards


To compare credit cards, you will need to consider how you plan to use the card, and whether the card you wish to apply for will meet your requirements for:

  • Credit limits 
  • Interest rates 
  • Interest-free days 
  • Fees and penalties 
  • Rewards 

You can learn more about each of these in the individual sections below.

Credit limits


The credit limit of your credit card is the total amount of funds made available by the lender. It is not calculated as a monthly or yearly limit, but as a full line of credit. The average credit card limit is $9,500 in Australia, and the amount offered by a lender will depend on your:

  • Income 
  • Credit score 
  • General financial health 

Different credit cards will have different minimum and maximum limits. For example, a premium credit card may have a minimum limit of $15,000 and a maximum of $100,000, while a student credit card may have a minimum limit of $500 and a maximum of $20,000.

Interest rates


Credit card purchase rates and cash advance rates will vary between cards and lenders. Interest is generally calculated daily on the balance owing and is charged once per month. Interest for Australian credit cards is often charged on top of an annual fee, as well as other charges that you may be liable for.

  • Purchase rates range from 7.49% to 23.99% 
  • The average purchase rate is between 12% and 19.99% 
  • The cash advance rate for credit cards will often be significantly higher than the purchase rate

You may also see introductory rates offered on certain cards, which will apply for a specific amount of time before reverting to a standard purchase rate after the introductory period has concluded.


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You'll generally incur a higher rate if you use your credit card to withdraw money from an ATM or to your bank account - i.e. a cash advance.

Interest-free days


Some credit cards include interest-free days, where the card issuer will only charge interest on a purchase after a set period of time. The number of interest-free days will depend on the card you apply for, however it’s common for credit cards to include an interest-free period of 55 days

With most cards, your interest-free days start on the first day of your statement period, and not on the day you make a purchase. Your statement period will vary depending on the terms set out by your card issuer. For example:

  • Your credit card offers 55 days interest-free on purchases 
  • Your interest-free days will begin on the first day of your statement period 
  • Your statement period begins on 1 November 
  • Your statement period ends on 30 November 
  • Any purchases made between that period will not accrue interest until 25 December

If you pay off your card’s balance in full within the interest-free period, you may not be charged any interest on your purchases. However, if you do not pay off your balance in full:

  • You will be charged interest on the remaining balance 
  • You may not be eligible for interest-free days in the next statement period 

Interest-free days will only apply to purchases made using your credit card. Cash advance withdrawals accrue interest from the day you make the withdrawal.

Fees and Penalties


Credit card fees can range from $0 up to $1,750, depending on the type of card offered. Cards with the most features and benefits will also generally have the highest fees. When comparing credit cards, consider how you plan to use the card and which fees will apply. 

For example, if you plan to use the card mostly for overseas online purchases, you may decide a card with no foreign currency conversion fee is most suitable. In the table below, you can see the various fees that may apply to your credit card.

Types of credit card fee

Fee TypeFee Description
Annual feeMost credit cards have a yearly fee. Fees can range from $0 to $700+ with platinum and black cards charging the highest fees.
Subsequent card feeSome lenders will charge you an additional yearly fee for each other card that’s part of your account.
Foreign currency conversion feeAn additional charge for transactions made outside of Australia. The most common foreign currency conversion fee is around 3%. This fee is charged independently from the exchange rate.
Over-the-counter payment feeAn over-the-counter payment fee is charged when you pay your credit card bill in person, with fees starting at around $2.
Over limit feeThe most common fee to be charged if your balance exceeds its limit is $40.
Late payment feeIf you cannot make minimum payments, you could be charged a late payment fee between $10 to $35.
Cash advance feeUsing your credit card to withdraw cash can cost you up to 5% of the withdrawn amount plus interest.
Foreign currency cash advanceIf you are in a foreign country and withdraw cash from your credit card, then you could be charged a foreign currency cash advance fee as well as the standard ATM fees.
Dishonour of direct credit feeIf you are paying off your credit card balance by direct credit and you dishonour that payment, then you may be charged a dishonour fee of up to $2.50.
Replacement card feeIt can cost you up to $25 to have a replacement issued if you lose your card or make it unusable.

Rewards


Credit cards with rewards systems will often come with higher additional fees or qualifying criteria to access the various rewards. Each time you use your rewards credit card, you can accrue points that can be redeemed for a variety of products and services such as:

  • Gift cards 
  • Cashback rewards 
  • Fuel vouchers 
  • Shopping discounts 
  • Fashion items 
  • Electronics 
  • Tickets for theme parks or movies 

Store credit cards, hotel credit cards, and premium credit cards all offer customer rewards for making significant purchases. If you are looking for a cheap credit card, you may wish to consider a low-interest credit card without rewards.


Types of credit cards


There are many types of credit cards available in Australia. Each card has a main feature - such as low purchase rates or a balance transfer offer - and some cards may have multiple features. How you plan to use your credit card will determine which option may be more or less suitable for your personal situation.

Top 14 Credit Cards

Type of Credit CardMain Feature
‘Plain Vanilla’ Credit Card Plain vanilla - i.e. basic - credit cards are the most simple. They come with fewer fees and rewards, and the annual fee is typically waived.
Balance TransferBalance transfer credit cards let you switch the balances between credit cards.
StudentStudent credit cards are targeted specifically towards students who have little to no credit history.
Frequent FlyerA frequent flyer credit card allows you to earn frequent flyer points that can be used towards flights, accommodation, and other travel perks.
RewardsRewards cards focus on rewarding your spending. They often have higher fees, and include a range of premium credit cards, store cards, and frequent flyer cards.
CashbackCashback credit cards reward a percentage of your spending as credit. Alternatively, you can get your cash back in other forms such as gift cards.
Low InterestLow-interest credit cards have low purchase rates and fewer rewards.
0% PurchasesA 0% purchase credit card offers an initial interest-free term for purchases, and will revert to standard rates once the interest-free period has expired.
No Annual FeeNo annual fee cards waive the annual card fee through a promotional period (i.e. one year free), or on a rolling basis subject to certain conditions.
BusinessBusiness credit cards allow you to open a line of credit and consolidate petty cash. All of the perks of personal credit cards also apply to business cards such as rewards schemes, interest-free days, and balance transfers.
No Foreign Transaction FeeNo foreign transaction fee credit cards do not charge a foreign transaction fee for purchases made outside of Australia.
SecuredA secured credit card requires a deposit and is designed for people with bad credit. Secured credit cards have a credit limit up to the amount secured.
Zero InterestZero-interest credit cards come with a promotional interest-free period up to 15 months. Once this promotional period expires, the card reverts to an annual interest rate.
Store Store credit cards are offered by specific retailers to earn points as part of their rewards program. A purchase rate will still apply to your transactions and there may be interest-free days available.

Premium credit cards


Premium credit cards generally have the highest annual fees and the most rewards. Gold, platinum, and black credit cards are all premium versions of standard credit cards, and often require the cardholder to spend a certain amount of money to access benefits. Premium credit cards offer:

  • Higher credit limits 
  • More reward points 
  • Additional benefits 

Gold cards are entry-level premium cards. They might be suitable if you’d like to get more benefits from your credit card without paying a high annual fee:

  • More reward points than regular cards 
  • Insurance coverage such as travel insurance 
  • Credit limits starting from $4,000

Platinum cards are a step up from gold as they offer more premium features and higher credit limits:

  • More reward points than gold cards 
  • Concierge services 
  • Credit limits starting from $10,000

Black cards are the highest tier of credit cards with the highest spending limits and the most benefits:

  • The highest amount of points per dollar spent 
  • Flight upgrades 
  • Credit limits up to $100,000

Premium Credit Card Comparison


GoldPlatinumBlack
Credit Limit$4,000$10,000$100,000
FeesLowestAverageHighest
BenefitsLeastAverageMost

Credit card insurance


Your credit card may include various types of complimentary insurance and protection, which is especially common with premium cards. Depending on the card you apply for, you may receive:


  • Overseas travel insurance - covering emergency medical expenses, loss or theft of personal belongings, and flight cancellation. 
  • Domestic travel insurance - covering expenses related to cancelled or delayed flights within Australia. 
  • Rental car insurance - covering theft, damage, towing and other charges related to your rental vehicle. 
  • Price protection - covering changes to product prices and allowing you to claim the difference as a refund. 
  • Purchase protection - covering accidental damage, loss or theft of items you have paid for using your card.

For both price protection and purchase protection, certain conditions will need to be met for your claim to be eligible. These will vary between credit card policies, so ensure you understand the criteria set out by your card issuer before applying.


Credit Cards Summary


Credit cards are used to access a line of credit from a bank or credit union. There are a variety of cards, lenders, and features available in Australia, and each type of card has its own benefits. Learning how to compare credit cards and their features is a crucial step in deciding which card may be more or less suitable for your personal situation. 

In summary, credit cards:

  • Allow you to make purchases using a line of credit 
  • Charge compounding interest 
  • Require a minimum monthly repayment 
  • Have individual rates for purchases and cash advance withdrawals 
  • Include fees unique to each card 
  • Include rewards unique to each card 
  • Can include interest-free days 
  • Can be used to consolidate existing credit card debt 
  • Often include insurance and buyer-protection security 

Credit Card Pros and Cons

Pros Cons
  • Financial protection in case of an emergency 
  • Can be used to build or improve your credit score 
  • Can include low introductory rates or 0% interest periods 
  • Flexibility in how you can purchase and pay for goods 
  • Insurance and fraud protection 
  • Allows you to dispute billing errors 
  • Often include some kind of rewards scheme 
  • Better spend-tracking and security than using cash 
  • Various fees can be difficult to understand 
  • Difficult to choose a card without knowing how to compare offers 
  • Applying for too many cards in a short time can damage your credit score 
  • Compounding interest can quickly add up 
  • Cash advance rates are often significantly higher 
  • Often has a long approval time 

Credit Cards FAQ

What credit score do I need to get a credit card?


Most lenders require you to have good credit before they issue you a credit card. You can request a copy of your credit history from any of the main credit agencies in Australia before applying for a card.


Can I get a credit card with bad credit?


You can apply for a secured credit card if you have bad credit. Secured cards involve offering a cash deposit equal to your credit limit. So if you deposit $1,000, your credit limit will be $1,000.


Can I get a credit card with no credit?


You can still get a credit card with no credit, however your application will be easier to approve if you have a stable source of income and can pass a credit check. You may find your options are extremely limited.


What are the easiest credit cards to get approved for?


Cards that have a low credit limit are easier to get approved for than those that have high limits. Standard credit cards that don’t have a lot of extras or additional fees may also be easier to get approved for than gold, platinum, or black credit cards.


How much do credit cards cost?


The cost of a credit card will depend on the type of card you apply for, and how you use it. You can often reduce the cost of your credit card by qualifying for interest-free days, and always repaying your balance in full each statement period.


What credit limit can I get?


The credit limit you can get largely depends on your income, assets, and credit score. A high income, valuable assets, and a clean credit score all increase the amount of credit you can access.


Can I increase the limit on my credit card?


You can increase the credit limit on your credit card by calling your card issuer. The amount that you can increase your credit card limit to will be determined by the issuer and will often be subject to a credit check before additional funds will be made available.


Can I increase the limit on my credit card?


You can increase the credit limit on your credit card by calling your card issuer. The amount that you can increase your credit card limit to will be determined by the issuer and will often be subject to a credit check before additional funds will be made available.


How long does it take to get a credit card approved?


It can take between three and four weeks for your credit card to be approved by a bank or credit union. You can expect to receive your card within 8 to 10 business days after you have received approval.


Can I cancel a credit card application?


If you have applied for a credit card and wish to cancel your application, you will need to call the card issuer and ask them to process your request. If you were issued with an application number or reference when submitting your application, you can provide this to help speed up the process.


Can I consolidate credit card debt from multiple cards?


You can save on interest and fees by consolidating debt from multiple cards into one. This is called a balance transfer. You may find balance transfer cards with a 0% interest introductory offer to help you repay your debt without accruing further interest.


How to avoid paying interest on credit cards

You can avoid paying interest on your credit card by repaying the full amount at the end of your statement period. You can also consider changing to a low-interest or interest-free credit card if you will carry the balance over from month to month.


Can I have more than one credit card?


The number of credit cards you can have is determined by the card issuer. There is no hard limit, and many people use multiple cards with different rewards structures to take advantage of various promotions. Be aware, however, that multiple cards with a high combined credit limit can negatively impact your credit score.


Who is eligible for a supplementary credit card?


Supplementary credit cards are offered to people with good credit who want to pass on a secondary card to a spouse or other family member. The person who uses the card must be over 18 years of age. You remain responsible for paying the balance, interest, and fees on the supplementary credit card.


What happens if you overpay your credit card bill?


Some credit card companies allow you to overpay your credit cards while others will limit your payments to how much you owe. When you overpay your account, you may receive a refund or credit applied to your account.


What happens if you don’t activate your credit card?


Not activating your card will not hurt your credit score. The most likely course of action is that the card issuer will call you to ensure that you have received your card. There are generally no penalties applied for not activating a credit card.


How do I cancel my credit card?


You can cancel your credit card by calling your card issuer. A representative will inform you of the next steps and how you can pay off your remaining balance if necessary.


How to dispose of old credit cards


It’s recommended to dispose of old credit cards to prevent anyone from accessing your financial information. To properly dispose of your card, you will need to cut it up with scissors and disable the RFID chip.