There are potentially hundreds of credit cards out there in the market, so how do you know which one is the best one for you?

If you’re considering getting a credit card, it’s important to do your research and compare products before sealing the deal. Credit cards offer different features and can also come with various fees, so it’s up to you and a little bit of research to decide which features are a must have for you.

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20.74%

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11.99%

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12.49%

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55

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19.74%

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20.74%

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19.99%

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55

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$295

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18.79%

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19.74%

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18.79%

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55

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$375

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19.99%

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$425

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19.99%

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44

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$95

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19.99%

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55

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$12.5

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19.99%

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$29

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11.99%

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45

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$225

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$15

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19.99%

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$149

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11.99%

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55

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$49

$25

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17.74%

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55

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$55

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19.99%

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55

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$199

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$289

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20.74%

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$64

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11.99%

Interest Free Days

44

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$50

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11.99%

Interest Free Days

55

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$0

for 12 months then $45

$15

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Learn more about credit cards

Why get a credit card?

Credit card companies make money mostly by charging you annual fees and interest on your unpaid balance when you don't pay off the full amount owing each month.

That's not to say that credit cards aren’t worth getting - you just need to make sure you use them sensibly. They can be handy when:

  • You don’t have a lot of cash with you
  • You want to pay for everyday things like shopping while earning points.

But that convenience can also come with a cost. You might find yourself spending more when using a credit card than when using cash if you aren’t a disciplined spender.

Getting started with credit cards

Here are a few things to keep in mind before applying for a credit card:

  • Be aware of the no-interest period: remember that the interest-free period is for a limited time only. If you still have an unpaid balance on your credit card when the offer ends, you may need to pay a high interest rate on the amount you owe. So it’s best to pay off the debt before the interest-free period expires.
  • High fees: credit cards with low interest rates usually charge higher annual fees. If you're prepared to accept those higher fees, this type of card can be useful depending on how you use the card (for example, if you purchase often with your card or intend to borrow on it). And if you only make the minimum payment each month, paying an annual fee can make better financial sense than paying a high interest rate.

Credit card fees and charges

The fees and charges that come with these pieces of plastic can add a lot to your bill. Here are some of the main fee types you could be facing:

  • Annual account-keeping fees
  • Fees for late payments
  • Cash advance fees (on top of interest on cash advances)
  • Fees for exceeding your credit limit
  • International transaction fees
  • Fees for using reward programs
  • Surcharges when paying with your credit card

Make sure you’re aware of these fees, so they don’t become a monthly surprise. 

Credit card reward points

Rewards cards could help your money work harder if you use your plastic for everyday purchases and pay down your balance every month.

Each time you use a rewards card, you’ll earn points that can be redeemed for rewards. Common rewards include:

  • Cash back: exchange earned points to reduce the balance you owe
  • General rewards: redeem rewards points for things like gift cards or magazines
  • Instant rewards: receive automatic discounts with participating merchants (for example, $10 off at the supermarket when you reach a certain number of points)
  • Frequent flyer: redeem rewards points for airline tickets and upgrades
  • Concierge service: an on-call service to handle requests such as booking a restaurant or tracking down a product

Because of the extra benefits, rewards cards usually have higher interest rates and annual fees than other cards. This can end up defeating the purpose of the rewards benefits in the first place, as you may have to spend more than expected to earn substantial rewards points. Check to see if you’ll spend enough using your credit card to justify getting a rewards card.

Also, compare points and fees across different programs to make sure you’re getting the best deal. For instance, one card with a lower annual fee might require a huge amount of spending to get any useful rewards, while another card with higher annual fee might only need a small amount of purchases to get a reward.

Comparing credit cards

Make sure to compare the features of different cards to find the one that best fits your needs. Several things to look out for include:

  • Minimum repayments
  • Interest rate for purchases and cash advances
  • Interest rate for balance transfers
  • Promotional interest rate (if any)
  • Interest-free period (if any)
  • Annual and late payment fees (if any)

You can find these in the 'key facts sheet' that should be available from all credit card issuers.

Comparison websites like RateCity can be integral in any credit card research, using a credit card comparison to weigh up the features and fees of the various credit cards you might be interested in. You can use a credit card comparison to identify which features are important to you and shop around for different credit card deals.

After doing the research, it’s worth making a short list of potential cards and carefully looking at each product’s relevant product disclosure statement (PDS), key fact sheet or equivalent documents. Once you've settled on a choice, contact the card issuer and ask any remaining questions until you have all the information you want.

However, when using comparison websites, you should always remember that:

  • Comparison websites make money in various ways, sometimes through sponsored or promoted links
  • The search results may show sponsored links ahead of non-sponsored results that may offer a better deal
  • Some comparison sites only cover a portion of the market, not the whole market

 

Frequently asked questions

What's the best credit card for rewards?

Credit cards offering rewards can be great if you know you’ll use the card enough to get significant rewards points, and use the rewards you earn.

They can also come with high annual fees that may end up nullifying the rewards, so think how often you use the card to decide whether the benefits outweigh the extra cost for you. A card with a lower annual fee might require a lot of spending to get any useful rewards, while another card with a higher annual fee might need fewer purchases to get a reward.

Also, think about the types of benefits you’d like. There’s no point in getting a card with rewards for retailers you never visit, or travel you don’t have time to use.

Can a pensioner get a credit card?

Pensioners can get credit cards with certain banks – if they can convince the bank they’re credit-worthy. Here are some points to consider if you are a pensioner looking for a credit card:

Annual income: Look for a credit card for which you easily fall within the minimum annual income requirements. This can be from the pension, superannuation or any other sources.

Annual fees: If high fees are a concern for you, opt for a card with a low or $0 annual fee. You want to make it as easy as possible to fit a credit card into your current lifestyle and spending habits.

Interest rate: Make sure you won’t have any nasty surprises on your credit card bill. Choose a card with a low interest rate to minimise risk (to both yourself and the bank – and this will help your application).

Should I get a credit card?

Credit cards are a personal responsibility, so the reasons behind getting a credit card should also be personal.

You should always consider all the pros and cons of taking out a credit card before you sign on the dotted line.

For example, pros include the fact that credit cards can be a good way of paying for purchases, earning rewards points and building a credit history.

But there are also cons – credit cards can be expensive and put a lot of financial pressure on you.

You need to consider your personal finances and your lifestyle choices. Do you need a credit card? What options are out there for me? Can I handle the repayments? Why am I getting a credit card in the first place?

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

How do you cancel a credit card?

Credit cards aren’t something you want to collect unnecessarily. If you’ve paid the balance off or have upgraded to a new credit card, it’s important to cancel your old cards to avoid any additional fees. Unless you’re doing a balance transfer, you’ll need to pay the outstanding balance before you cancel your credit card. If you’ve opted for a card with reward points, make sure you redeem or transfer the points before you close your account. To avoid any bounced payments and save yourself an admin headache, redirect all your direct debits to a new card or account. Once you’ve done all the preparation, call your bank or credit card provider to get the cancellation underway. Once you receive a confirmation letter, destroy your card and make sure the numbers aren’t legible.

How does credit card interest work?

Generally, when we talk about credit card interest, we mean the purchase interest rate, which is the interest charged on purchases you make with your credit card.

If you don’t pay your full balance each month (or even if you pay the minimum amount), you are charged interest on all the outstanding transactions and the remaining balance. However, interest is also charged on cash advances, balance transfers, special rate offers and, in some cases, even the fees charged by the company.

The interest rate can vary, depending on the credit card. Some have an interest-free period, otherwise you start paying interest from the day you make a purchase or from the day your monthly statement is issued. So avoid interest by paying the full amount promptly.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

What is a credit card?

A credit card is a payment method which lets you pay for goods and services without using your own money. It’s essentially a short-term loan which lets you borrow the bank’s money to pay for things which you can pay back – potentially with interest – at a later date. Credit cards can also be used to withdraw money from an ATM, which is known as a cash advance. Because you’re borrowing money from a bank, credit cards charge you interest on the money you use (unless you repay the entire debt during the interest-free period). When you apply for a credit card, the bank gives you a credit limit which sets the maximum amount you can borrow using your card. Credit cards are one of the most popular methods of payments and can be a convenient way of paying for goods and services in store, online and all around the globe.

How to make a credit card online

Credit cards can be useful, provided you understand the risks. If you’re wondering about how to make a credit card online application, here are some steps to follow:

  • Test the market – Many credit card options are available online. Compare providers by fees, interest and perks to ensure you’re getting the best deal.
  • Complete the application – Once you’ve selected a card, head to the provider’s website and complete the online credit card application form. Forms vary by providers.
  • Provide details – Most cards require you to meet age, residency, income and credit status condition, and you need to provide details like a bank account statement to prove this.
  • Review details – Ensure the information you’ve entered is correct.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

One thing to remember is that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APRs for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible

How to get a free credit card

Many people want to know how to get a free credit card. The reality is that all credit cards come with associated costs when used to make purchases – even if it’s simply the cost of making repayments.

However, many lenders offer incentives for customers such as a $0 annual fee or 0 per cent interest on purchases during an introductory period. You may be able to cut down on the usual costs associated with a credit card by comparing and choosing the right card to suit your requirements.

Additionally, paying off your balance in full during an interest-free period means you could only have to pay back the cost of purchases without interest. You could also be eligible for additional rewards such as cashback during that time, saving you more money.

How to pay a credit card

There are a few ways to pay a credit card bill. One way is to pay via BPAY. This means you can make your credit card payment on the phone or via the internet.

You can set up an automatic payment from an Australian bank account to pay your credit card bill each month. You can choose how much you want to pay of your credit card bill when you set up the auto payments.

Different Australian banks will also allow you to pay off credit card bills in person at one of their branches.

Some credit card companies also allow you to pay your credit card via an app whenever each statement is due.

How to get money from a credit card

Strapped for cash but only have your credit card available? You may be wondering if you can withdraw money from your credit card. The short answer is yes, but it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you will be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you will also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. Designed to incentivise customers to switch banks, a balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. Applying for a balance transfer credit card is relatively straightforward. When your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. There are plenty of balance transfer offers available on the market with 0 per cent interest rates available from six to 24 months.

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmoveable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.