EVERYTHING YOU NEED TO KNOW ABOUT CREDIT CARDS

Credit cards are one of the most common forms of personal borrowing. They allow you to borrow money up to a defined limit, providing you make a minimum repayment each month.

Any balance left outstanding at the end of each month is charged interest. That means if you fail to pay your entire balance off, purchases made on the card will attract interest and cost more than if paid for with cash.

Compared to other forms of finance, credit cards have very high interest rates, which means debt can grow quickly if left unpaid.

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Do I Need A Credit Card?

Credit cards are convenient, widely accepted and can also provide additional benefits beyond access to money.

But they’re not for everybody.

Credit cards can tempt you to make purchases you can’t afford and are a very expensive form of finance, with interest rates approaching 20 per cent per annum.

If you’re worried about over-spending or plan on using a credit card to pay off other debts, think twice about applying.

The Trap Of Minimum Repayments

Credit cards require you to make a minimum repayment each month.

But if you only pay this amount, you’ll have to pay interest on the remaining balance – including any interest charges accrued to date - and it will take much longer to get out of debt.

Making only the minimum repayment is a fast track to having your debt spiral out of control. So, if you’re falling behind each month, set a repayment budget to work your way back into the black.

MoneySaver HQ provides a handy calculator to figure out how long it will take to pay off your card with minimum repayments versus higher repayments.

Fees and Charges

Credit cards come with a range of fees, depending on how you use them. Most of these fees can be avoided if you plan carefully and are aware of how and when they are incurred.

Common fees and charges include:

  • Account keeping fees
  • International transaction fees
  • Fees for reward programs
  • Fees for late payments
  • Fees for exceeding your credit limit
  • Fees for cash advances
  • Merchant surcharges

As with any financial product, minimising the fees and charges you incur should be a priority. This means shopping around for the best deal from the outset, being aware of when and how fees are incurred and planning ahead to avoid these situations.

Click here for low fee and low rate cards

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How much do Aussies owe?

Australians are drowning in debt.

According to the Reserve Bank of Australia, we collectively hold $32 billion of credit card debt that is accruing interest, an average of around $4,200 per credit card holder.

At an average interest rate of around 18 per cent per annum, this debt racks up interest charges of almost $6 billion a year, or $760 per person. That’s money that goes straight into your credit card provider’s pocket.

Check out MoneySmart’s credit card debt clock for an up-to-the-second count of how much money Australians are wasting every year on credit card interest payments.

7 Tips To Save On Credit Cards

Make more than the minimum repayment

Ideally, you want to be repaying the full balance each month, but if you can’t then aim to pay as much as you can above the minimum repayment.

If you’re struggling to repay the full balance each month, consider a balance transfer to a card with a low interest rate to minimise the amount of interest you’re charged.

Compare balance transfer cards

Avoid cash advances

Cash advances generally have no interest free period, attract a higher interest rate than purchases, and often incur ATM or withdrawal fees. Needless to say, cash advances should be avoided at all costs.

Don’t overpay for rewards

Rewards programs get less attractive the less you spend, so be careful of overpaying for the benefits of a rewards card. Calculate the dollar value of rewards and then deduct the annual card fee to see whether a rewards card is worthwhile at your level of spending.

Compare rewards cards

Read more about credit card rewards here

Limit the number of cards you have

As a lot of credit cards come with annual fees, its best to minimise the number of credit cards you have. Ideally, you should consolidate your spending onto one card to make debt management easier and get maximum benefit from any rewards program.

Ensure your card limit is manageable

If your card limit would be too high for you to manage if it was maxed out, then contact the card provider and have it lowered.

If you repeatedly get offers from a card provider to increase your limit, you can ask for these to be stopped too.

Don’t risk falling into debt and spoiling your credit rating.

Double-check your statements

Always review your statements to ensure that the charges are correct. If anything looks odd or is incorrect, contact your card provider immediately.

Plan a budget before borrowing

A lot of people get into debt and work out how to repay it later, but a smarter course of action is to plan first and then borrow. Draw up a budget of all your incomings and outgoings to see what you can afford to borrow and repay. Then, stay within your limits.

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Never miss a repayment

Consider setting up a direct debit to pay a fixed amount off your credit card balance each payday.

Alternatively, if your card provider allows it, arrange for the full outstanding balance on your credit card to be debited from your savings account each month to ensure you never incur interest or late payment charges.

This will also maximise the interest-free period on your purchases.

How To Compare Credit Cards

Shopping around to get the best deal possible on credit cards is well worth your while.

Of course, the best deal for you will depend on your circumstances, so spend some time beforehand identifying what the card will be used for, how often you’ll be swiping, and how much is likely to be spent and repaid each month.

American Express Essential Credit Card
American Express Essential Credit Card
  • Earn up to 1 Membership Rewards point for every $1 spent
  • $0 annual fee
  • 0% p.a. on balance transfers for the first 12 months
balance transfer rate
0% for 12 months
purchase rate
14.99%
annual fee
$0
Go to site
More info
balance transfer rate
0% for 12 months
annual fee
$0
purchase rate
14.99%
Interest free days
55
Rewards description
Transfer points to a range of airline programs or redeem your points for travel, gift cards, retail rewards and shopping gift cards.
St.George Vertigo Platinum
St.George Vertigo Platinum
  • 0% p.a. on balance transfers for the first 20 months
  • 12.74% p.a. on purchases
  • $99 annual fee
balance transfer rate
0% for 20 months and then 21.49%
purchase rate
12.74%
annual fee
$99
Go to site
More info
balance transfer rate
0% for 20 months and then 21.49%
annual fee
$99
purchase rate
12.74%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50
NAB Premium Card
NAB Premium Card
  • 0% p.a. on purchases and balance transfers for 15 months
  • Complimentary insurances including overseas travel insurance
  • Platinum Concierge Service. Your own 24 hour, 7 day personal assistant
balance transfer rate
0% for 15 months
purchase rate
0% for 15 months then 19.74%
annual fee
$90
Go to site
More info
balance transfer rate
0% for 15 months
annual fee
$90
purchase rate
0% for 15 months then 19.74%
Interest free days
44
Interest rate on cash withdrawals
21.74%
Fee for cash withdrawals
2%, Min $2.50
NAB Premium Card
NAB Premium Card
  • 0% p.a. on purchases and balance transfers for 15 months
  • Complimentary insurances including overseas travel insurance
  • Platinum Concierge Service. Your own 24 hour, 7 day personal assistant
balance transfer rate
0% for 15 months
purchase rate
0% for 15 months then 19.74%
annual fee
$90
Go to site
More info
balance transfer rate
0% for 15 months
annual fee
$90
purchase rate
0% for 15 months then 19.74%
Interest free days
44
Interest rate on cash withdrawals
21.74%
Fee for cash withdrawals
2%, Min $2.50
NAB Low Rate Card
NAB Low Rate Card
  • Make purchases with our lowest interest rate and longest interest-free period
  • 0% p.a on balance transfers for 24 months (with 2.5% balance transfer fee)
  • Secure online application. Get a response in 60 seconds.
balance transfer rate
0% for 24 months (2.50% balance transfer fee)
purchase rate
13.99%
annual fee
$59
Go to site
More info
balance transfer rate
0% for 24 months (2.50% balance transfer fee)
annual fee
$59
purchase rate
13.99%
Interest free days
55
Interest rate on cash withdrawals
21.74%
Fee for cash withdrawals
2%, Min $2.50
Westpac Low Rate - Online Only Offer
Westpac Low Rate - Online Only Offer
  • 0% p.a. rate on balance transfers for 18 months when requested at card application
  • 0.99% p.a. on purchases for up to 3 months from card approval
  • Online only offer for new approved customers who apply by 11 April 2016
balance transfer rate
0% for 18 months (2.00% balance transfer fee)
purchase rate
0.99% for 3 months then 13.49%
annual fee
$59
Go to site
More info
balance transfer rate
0% for 18 months (2.00% balance transfer fee)
annual fee
$59
purchase rate
0.99% for 3 months then 13.49%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50, Max $150
Coles Low Rate MasterCard
Coles Low Rate MasterCard
  • Low ongoing purchase rate of 9.99% p.a.
  • Earn 0.5 flybuys points for every dollar spent on the card at Coles Supermarkets
  • Low annual fee of $49 p.a.
purchase rate
9.99%
annual fee
$49
balance transfer rate
0% for 6 months
Go to site
More info
balance transfer rate
0% for 6 months
annual fee
$49
purchase rate
9.99%
Interest free days
62
Interest rate on cash withdrawals
19.99%
Fee for cash withdrawals
3%, Min $1.95
St.George Vertigo Platinum
St.George Vertigo Platinum
  • 0% p.a. on balance transfers for the first 20 months
  • 12.74% p.a. on purchases
  • $99 annual fee
purchase rate
12.74%
annual fee
$99
balance transfer rate
0% for 20 months and then 21.49%
Go to site
More info
balance transfer rate
0% for 20 months and then 21.49%
annual fee
$99
purchase rate
12.74%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50
Bank of Melbourne Vertigo
Bank of Melbourne Vertigo
  • 0% p.a. on balance transfers for the first 18 months
  • 13.24% p.a. on purchases
  • Up to 55 interest free days on purchases
purchase rate
13.24%
annual fee
$55
balance transfer rate
0% for 18 months and then 21.49%
Go to site
More info
balance transfer rate
0% for 18 months and then 21.49%
annual fee
$55
purchase rate
13.24%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50
American Express Essential Credit Card
American Express Essential Credit Card
  • Earn up to 1 Membership Rewards point for every $1 spent
  • $0 annual fee
  • 0% p.a. on balance transfers for the first 12 months
balance transfer rate
0% for 12 months
annual fees
$0
purchase rate
14.99%
Go to site
More info
balance transfer rate
0% for 12 months
annual fees
$0
purchase rate
14.99%
Interest free days
55
Rewards description
Transfer points to a range of airline programs or redeem your points for travel, gift cards, retail rewards and shopping gift cards.
St.George Amplify Platinum
St.George Amplify Platinum
  • 19.49% p.a. on purchases
  • 0% p.a. on balance transfers for 18 months
  • Double points on international spend
balance transfer rate
0% for 18 months and then 20.24%
annual fees
$99
purchase rate
19.49%
Go to site
More info
balance transfer rate
0% for 18 months and then 20.24%
annual fees
$99
purchase rate
19.49%
Interest free days
55
Interest rate on cash withdrawals
20.24%
Fee for cash withdrawals
2%, Min $2.50
Rewards description
Points are automatically credited to the Qantas Frequent Flyer program.
American Express Qantas Premium Card
American Express Qantas Premium Card
  • Earn up to 2 bonus points per dollar spent on eligible purchases
  • Receive up to 30,000 extra Qantas Points
  • Enjoy 2 Qantas Club Lounge invitations every year
balance transfer rate
0% for 12 months (1.00% balance transfer fee)
annual fees
$249
purchase rate
20.74%
Go to site
More info
balance transfer rate
0% for 12 months (1.00% balance transfer fee)
annual fees
$249
purchase rate
20.74%
Interest free days
44
Rewards description
Points are automatically credited to the Qantas Frequent Flyer program.
Virgin Money Virgin Australia Velocity Flyer Card - Purchase Rate Offer
Virgin Money Virgin Australia Velocity Flyer Card - Purchase Rate Offer
  • 0% p.a. on balance transfers for 6 months
  • 0% p.a. on purchases for up to 12 months
  • Enjoy an exclusive annual flight benefit. Conditions apply
Purchase Rate
0% for 12 months then 20.74%
Annual Fee
$129
Balance Transfer Rate
0% for 6 months and then 20.99%
Go to site
More info
Balance Transfer Rate
0% for 6 months and then 20.99%
Annual Fee
$129
Purchase Rate
0% for 12 months then 20.74%
Interest free days
44
Interest rate on cash withdrawals
20.99%
Fee for cash withdrawals
2.7%, Min $2.70
Rewards description
Points are credited to the Velocity Frequent Flyer program.
Westpac Low Rate - Online Only Offer
Westpac Low Rate - Online Only Offer
  • 0% p.a. rate on balance transfers for 18 months when requested at card application
  • 0.99% p.a. on purchases for up to 3 months from card approval
  • Online only offer for new approved customers who apply by 11 April 2016
Purchase Rate
0.99% for 3 months then 13.49%
Annual Fee
$59
Balance Transfer Rate
0% for 18 months (2.00% balance transfer fee)
Go to site
More info
Balance Transfer Rate
0% for 18 months (2.00% balance transfer fee)
Annual Fee
$59
Purchase Rate
0.99% for 3 months then 13.49%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50, Max $150
St.George Vertigo
St.George Vertigo
  • 0% p.a. on balance transfers for the first 18 months
  • 13.24% p.a. on purchases
  • Up to 55 interest free days on purchases
Purchase Rate
13.24%
Annual Fee
$55
Balance Transfer Rate
0% for 18 months and then 21.49%
Go to site
More info
Balance Transfer Rate
0% for 18 months and then 21.49%
Annual Fee
$55
Purchase Rate
13.24%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50
American Express Essential Credit Card
American Express Essential Credit Card
  • Earn up to 1 Membership Rewards point for every $1 spent
  • $0 annual fee
  • 0% p.a. on balance transfers for the first 12 months
annual fees
$0
Balance transfer rate
0% for 12 months
purchase rate
14.99%
Go to site
More info
Balance transfer rate
0% for 12 months
annual fees
$0
purchase rate
14.99%
interest free days
55
Rewards description
Transfer points to a range of airline programs or redeem your points for travel, gift cards, retail rewards and shopping gift cards.
Bankwest Zero Gold MasterCard
Bankwest Zero Gold MasterCard
  • No annual fee
  • Complimentary credit card international travel insurance for you and your family
  • Free worldwide emergency card replacement
annual fees
$0
Balance transfer rate
2.99% for 9 months
purchase rate
17.99%
Go to site
More info
Balance transfer rate
2.99% for 9 months
annual fees
$0
purchase rate
17.99%
interest free days
55
Interest rate on cash withdrawals
21.99%
Fee for cash withdrawals
2%, Min $4.00
American Express Velocity Escape Card
American Express Velocity Escape Card
  • 0% p.a. on balance transfers for the first 12 months
  • No annual fee
  • Earn up to 7,500 bonus Velocity Points, limited time only
annual fees
$0
Balance transfer rate
0% for 12 months (1.00% balance transfer fee)
purchase rate
20.74%
Go to site
More info
Balance transfer rate
0% for 12 months (1.00% balance transfer fee)
annual fees
$0
purchase rate
20.74%
interest free days
44
Rewards description
Points automatically transferred to your Velocity account
St.George Amplify Platinum
St.George Amplify Platinum
  • 19.49% p.a. on purchases
  • 0% p.a. on balance transfers for 18 months
  • Double points on international spend
Balance transfer rate
0% for 18 months and then 20.24%
annual fees
$99
purchase rate
19.49%
Go to site
More info
Balance transfer rate
0% for 18 months and then 20.24%
annual fees
$99
purchase rate
19.49%
Interest free days
55
Interest rate on cash withdrawals
20.24%
Fee for cash withdrawals
2%, Min $2.50
rewards_description
Transfer points to a range of airline programs or redeem your points for travel, gift cards, retail rewards and shopping gift cards.
Bank of Melbourne Vertigo Platinum
Bank of Melbourne Vertigo Platinum
  • 0% p.a. on balance transfers for the first 20 months
  • 12.74% p.a on purchases
  • $99 annual fee
Balance transfer rate
0% for 20 months and then 21.49%
annual fees
$99
purchase rate
12.74%
Go to site
More info
Balance transfer rate
0% for 20 months and then 21.49%
annual fees
$99
purchase rate
12.74%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50
St.George Vertigo Platinum
St.George Vertigo Platinum
  • 0% p.a. on balance transfers for the first 20 months
  • 12.74% p.a. on purchases
  • $99 annual fee
Balance transfer rate
0% for 20 months and then 21.49%
annual fees
$99
purchase rate
12.74%
Go to site
More info
Balance transfer rate
0% for 20 months and then 21.49%
annual fees
$99
purchase rate
12.74%
Interest free days
55
Interest rate on cash withdrawals
21.49%
Fee for cash withdrawals
2%, Min $2.50

Credit Cards Switch and Save

Health check my card


And always make sure to review the card documentation, including the key facts sheet and the product disclosure statement. This will include all information about the card, including:

  • Minimum repayment
  • Interest rate that applies to purchases and cash advances
  • Interest rate that applies to balance transfers and for how long
  • Any promotional interest rate
  • Annual and late payment fees

It will also help you identify any ‘hidden’ fees that may not be advertised.

Remember, the devil is always in the detail with financial products, and credit cards are no exception.

Promotions and special offers

Credit card customers are incredibly valuable to financial institutions, which means that there are always special deals or offers available in the market place to entice people to sign-up for a new card.

One common offer at the moment is a “0% interest rate on purchases” deal, which sounds great on face value.

Unfortunately, there’s a catch. In this case, the deal generally expires after 6 – 12 months, which means any balance on the card at that time will start attracting interest charges.

So remember, if an offer looks too good to be true, it usually is. Always read the fine print before signing up for a new credit card.

Credit Cards Are Now Pin Only

New consumer finance laws mean you’re now required to enter a PIN to authorise credit card transactions when making a purchase at a point of sale. Signatures are no longer accepted as authorisation.