Competition is heating up in Australia's credit card market – specifically for customers chasing Qantas points. ANZ has launched its Qantas Business Rewards card, offering 100k sign up points, with the $375 annual fee waived in the first year. For consumers, G&C Mutual Bank launched a Platinum Visa Credit Card giving customers 50,000 sign-up Qantas points, with a $299 annual fee. Elsewhere, CommBank is no longer offering balance transfers on its credit cards as of this month. It joins Amex as a major credit card provider in Australia with no balance transfer offering.
Brad Kelly, Money.com.au's credit card expert
More in our credit cards guide:
Student credit cards are targeted specifically towards students who have little to no credit history. These are usually a fairly basic credit card, with low costs and few significant perks.
A travel credit card allows you to earn frequent flyer points that can be used towards flights, accommodation, and other travel perks.
Cashback credit cards reward a percentage of your spending as credit. Alternatively, you can get your cash back in other forms such as gift cards.
Business credit cards are designed to offer a line of credit for business customers. All of the perks of personal credit cards also apply to business cards such as rewards schemes, interest-free days, and balance transfers. Corporate credit cards are designed for larger businesses.
Charge cards are very similar to credit cards, but there is no set credit limit and the cardholder must pay off the full balance each month. There are no interest charges on charge cards.
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.
Compare credit card interest rates
Check if the card rewards will be useful to you
Look for a low annual credit card fee
Check the interest-free days so you pay less interest
To compare credit cards, start by figuring out how you plan to use the card. It’s important to get a credit card that’s a suitable match for your spending habits.
Whichever type of card you need, there are some key aspects of how credit cards work that are important to consider across the board:
The credit limit of your credit card is the total amount of funds the lender makes available for your to borrow any given time (i.e. the maximum outstanding balance).
According to the RBA, the average credit card limit in Australia is around $9,500. The limit offered to you by a lender will depend on your:
The minimum and maximum credit limit will also depend on the type of credit card. 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 $10,000.
Choosing a suitable credit limit is important as the available limit on your credit card (not the balance) will be considered by lenders if you make a loan application in future.
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.
The cash advance rate for credit cards will often be significantly higher than the purchase rate.
You may also see **introductory low-rate offers on certain cards. This rate will apply for a specific amount of time before reverting to a standard purchase rate after the introductory period has concluded.
The vast majority of credit cards include interest-free days, where the card issuer will only charge interest on a purchase after a set period of time. If you pay off your card’s balance within this period you generally won’t need to pay any interest.
Interest-free days vary, but 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. Here’s an example:
Credit cards linked to a rewards program often come with higher annual fees in return for the ability to earn points on eligible spending and redeem them on the likes of.
Make sure you understand the criteria for earning rewards and how you can redeem them to make sure you'll get value from the program.
If you are looking for a basic, cheap credit card, avoiding rewards altogether could help you save.
Credit card annual fees can range from $0 up to $1,750, depending on the type of card. Cards with the most features and benefits generally have the highest annual fee. But the annual fee is just one of many fees you could potentially be charged.
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 credit card with no foreign currency conversion fee is most suitable.
If the card is only for emergencies, a card with no annual fee could be more suitable.
Most credit cards have a yearly fee. Fees can range from $0 to $700+ with platinum and black cards charging the highest fees.
|Extra card fee|
Some lenders will charge you an additional yearly fee for each other card that’s part of your account.
|Foreign currency conversion fee|
An 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 rat
|Over limit fee|
The most common fee to be charged if your balance exceeds its limit is $40.
|Late payment fee|
If you cannot make minimum payments, you could be charged a late payment fee between $10 to $35.
|Cash advance fee|
Using your credit card to withdraw cash can cost you up to 5% of the withdrawn amount plus interest.
|Foreign currency cash advance|
If 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 fee|
If 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 fee|
It can cost you up to $25 to have a replacement issued if you lose your card or make it unusable.
Your credit card may include various types of complimentary insurance and protection. This is especially common on more premium cards. Depending on the card you apply for, you may receive:
Credit card insurance generally only applies to purchases made using the credit card. Be sure to check the policy documents carefully so you are aware of what is covered and any exclusions and limits that apply.
Qualifying criteria for credit cards will vary between cards and issuers. To qualify for the majority of credit cards in Australia, you will need to meet some basic requirements:
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.
You can apply for a credit card online over the phone, at a bank, and even at the checkout at certain stores. 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 so they can assess your ability to comfortably meet repayments, and to determine your credit limit. You’ll be asked for:
If used responsibly, in line with your existing spending habits, a credit card can be a handy tool for your day-to-day finances. But they're not for everyone.
“When considering whether to apply for a credit card, think about what kind of person you are” says David Rankin, financial coach at Sort My Money and former bank manager at ANZ and Westpac.
“If you are a spender by nature, for example, a credit card is not for you.”
“If you are a saver and discipline comes easily, ask yourself what you want from a credit card. Is it purchase insurance, travel insurance, rewards points or convenience, for example?"
David says it's important to factor in all costs, including annual fees, before applying. But you also need to be proactive about minimising costs when you have the card.
“The aim should always be to pay off the balance in full each month [to avoid interest]”.
“Cash advances come with punitive fees and interest and are not looked upon favourably by lenders when it comes to mortgage applications and so are best avoided,” David says.
For some people who need access to funds for a large expense, but prefer to have a fixed amount of debt and a fixed time frame for paying it off, a personal loan may be more suitable.
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.
It is generally more difficult to be approved for a credit card if you have a bad credit score. That said, a bad credit score does not automatically disqualify you from getting a credit card. It will come down to your individual circumstances and the lender.
But you should think carefully about whether it will be suitable for you if you have bad credit. It may be worth spending some time improving your credit score before applying.
Remember, having a credit card application declined could damage your credit score further.
You can still get a credit card with no credit, provided you have a stable source of income and are in a good overall financial position. You may only be able to get approval based on a low credit limit if you have a limited credit history.
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.
In most cases, the card’s annual fee is the main cost of your credit card. But 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.
If you let interest build up, credit cards can be very expensive.
The credit limit you can get largely depends on your income, assets, and credit score. A high income, valuable assets, and a clean credit report all increase the amount of credit you can access.
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.
Approval of an initial credit card application can be very quick – within minutes if you apply online. However, it’s common to be asked to provide documents, like payslips and bank statements, in order for your application to be assessed in full.
Overall, a lot of people can get approved with a day or two and have their credit card ready to use within 1-2 weeks.
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.
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.
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.
Another option is a charge card which works similarly to a credit card but with no interest applying. However, you need to clear the balance in full each month. Only American Express offers charge cards to consumers in Australia.
The number of credit cards you can have is determined by the card issuer(s). There is no hard limit, and many people use multiple cards with different rewards structures to take advantage of various promotions.
Each application will be assessed separately by the lender, based on your ability to repay the balance comfortably.
Be aware, however, that multiple cards with a high combined credit limit can negatively impact your credit score.
Additional credit cards are offered to people who are approved for a card and 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.
You can usually activate a credit card through the provider’s mobile app or online banking. Once the card is activated, it’s ready to use and add to your device’s mobile wallet for mobile payments.
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.
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 card’s chip.