Steps for applying for a credit card in Australia:
Before you think about making an application for a credit card, you need to be sure of what kind of card will be suitable.
The only thing worse than applying for a credit card and being declined, is applying for an unsuitable one and being approved.
The average Aussie spends about $2,900 per month on their credit card. That’s not going to earn you enough points to get you to the first-class lounge. So if you’re like the average person, a rewards credit card with a big annual fee is not going to be much use to you. Consider a low rate or no fee card instead.
On the flip side of that, if you spend a lot and want to maximise rewards, there’s not much point (or points!) in going with a basic card.
Ask yourself ‘am I going to pay the whole balance off every month or roll some into the next month?’ If you’re a “revolver”, go for a lower rate. If you are paying it off every month, go for a low fee.
Brad Kelly, Money.com.au credit card expert
By law credit card issuers must make a very unsexy document called a ‘target market determination’ available with their cards. This is helpful to look at as it describes what the credit card is offering and the kind of customers the card is designed for.
Here’s a super quick overview of the main card types and what they’re broadly designed for.
Often a basic card, but not always. Some more premium cards waive the fee if you meet a monthly or annual spend limit.
Not a type of credit card as such, but a facility offered by some cards. Balance transfer credit cards offer a temporarily low (or no) interest rate on an existing credit card balance you transfer from another card.
Once you’ve figured out what kind of credit card will suit you, you want to find the best version of that card.
Look for the card’s 'key fact sheet' (another document card issuers must make available to you by law) as this is a good way of getting basic information on a card without the marketing spin.
Also think about who you want to issue your card. A bank, a supermarket, an airline? Think about what you spend the bulk of your money on, and based on that what kind of card will give you the most back.
Finally, do you want an American Express card, or is a Visa or Mastercard okay?
Amex has some good products – the trade off is it’s not accepted as widely as Visa or Mastercard.
Applying for a credit card, or any financial product, can be a pain. But it’s not just a case of jumping through hoops for the bank’s amusement.
Credit card providers are bound by the National Consumer Credit Protection Act of 2009 and they need to make sure that only suitable applicants are approved. Otherwise they’ll be penalised.
The good news is the eligibility criteria are pretty much the same no matter who you apply with. You generally need to:
Let’s unpack these last two points.
There usually aren’t hard and fast income requirements for a credit card. But there are some general points to consider.
Firstly, credit card companies prefer if your income is regular and that you’re employed. Self-employed people often have difficulty being approved. Likewise, if you’re a self-funded retiree, getting approved will be more difficult.
Next, is your income high enough that you can afford the repayments on the card? Some top-tier ('Black') credit cards have a minimum limit of $15,000, and to be approved you’ll need to be earning enough to service that level of debt.
Credit cards providers don’t disclose publicly what their credit score cut off is. But rest assured they will check your credit report as part of a credit card assessment. There are a few red flags they will be looking for:
Before you apply for a credit card, do a free credit score check to see if you're in good shape.
All card issuers have an online application process and they are all pretty much the same.
Have your ID (Medicare card, driver licence, passport etc.) handy if you don’t have an existing relationship with the card issuer.
You’ll also need to provide information about your income, expenses and other debts.
You'll get a response from the lender in 60 seconds, and it will either be ‘Yes’, ‘No’ or, more often than not, ‘Yes, but we need more information’.
This will usually mean being asked to upload payslips for the last three months as well as recent bank statements.
At this stage, you’ll also need to confirm what your credit limit will be. The card issuer will tell you what your maximum potential limit is based on your application, and there will be a minimum allowed limit. The lowest you will see is usually $500.
Remember you don’t need to accept the maximum credit limit the card issuer offers you.
Choose a limit that matches your spending with a bit of a buffer (otherwise if you need to increase your limit down the track, this will require another credit assessment).
Picking the right credit limit is important. If you get a credit card with a high limit you don’t need, it might tempt you to overspend and it will impact your future borrowing capacity.
You see, when assessing loan applications (e.g. a personal loan) lenders don't look at your actual credit card balance, they assume you have maxed out your full credit limit even if you haven't.
If your credit card is fully approved, a physical card will be sent to you in the post (unless it’s a digital-only card). You’ll then need to activate the card and add it to your mobile wallet so you can use it on your phone, watch or any other devices.
As a last step in the process, make sure you have a plan for paying off your card balance.
Some card issuers allow you to set up a direct debit from your bank account to pay the card in full. This is a great idea to save on potential late fees and interest.
All card issuers allow payments to be made to them via BPAY but beware some providers (e.g. Latitude) charge a fee for BPAY transactions.