Frequently Asked Questions

What is a credit card?

Credit cards are small plastic cards that allow you to borrow money from a lender ‘on credit’ to make purchases. You can use the card to shop for groceries, buy clothes online, pay bills, and more – and the money paid isn’t coming from your bank account, but rather straight from your lender. At the end of each statement period, you’ll need to pay off your credit card balance, or at the very least a minimum owed amount.

Essentially, a credit card acts as a short term loan which allows you to shop for things you need immediately.

What is credit card interest?

Interest is the amount of money you owe your lender for borrowing their money. When you fail to pay off your credit card balance before the due date, you’re charged interest. Some cards charge interest on immediately after your make a purchase.

It is because of this interest that Australians need to use their credit card sensibly. You can quickly find yourself in debt if you miss your card’s due date even once. Luckily, there are ways to navigate around this. For one, tracking down a low-interest credit card ensures that even if you don’t pay by your due date, you may not be on deck for a massive bill.

Find out more about credit card interest.

How can I apply for a credit card?

You can easily apply for a credit card online by providing lenders with your contact details and whatever relevant information they require. Or, you can go into a bricks-and-mortar bank and have a representative the account personally.

You may be wondering what is considered when you apply. The factors will vary, depending on the lender and card in question, but there are plenty of consistencies.

  • Employment type & history
  • Income thresholds for the product
  • Your credit report and history with the lender

If you’re applying for a new card (when the old one expires), keep in mind your lender will likely send you a replacement card when it’s needed.

What is a balance transfer?

A balance transfer is the action of moving your unpaid credit card balance to a low or zero-interest card. Here, you can pay off your balance without the immediate threat of snowballing interest. This is one of the ways you can consolidate your debt, which works well if you’ve got multiple credit cards.

Learn more about credit repair and balance transfers.

How does a credit card limit work?

You can only spend a certain amount of money with your credit card. The maximum spend amount is your credit limit. Your limit can be affected in a number of ways. Let’s say, for example, you have a credit limit of $1,000.

  1. You spend $500 on your credit card and pay the entire amount off before the billing period’s due date. Next month, your credit limit remains the same.
  2. You spend $500 on your credit card and only repay $200. Your credit limit in the following month will be closer to $300 (but will vary depending on interest charged and any fees owed).

Your lender will ultimately decide whether they’re comfortable with you increasing your credit limit in the future. They’ll base their decision on factors such as your previous history and your level of income.

What is the annual percentage rate, or APR?

The APR is the interest rate charged on the balance of your credit card. The way your credit card interest is calculated is by dividing the APR by however many days are in the year, and then using this rate to calculate your compounding interest each day. Of course, various other factors influence the amount owing, such as interest added on due to cash advances or balance transfers.

Unsurprisingly, 0% APR means you’ll pay 0% interest all year long, provided you pay off your balance each statement period.

What are credit card rewards, and how can I redeem them?

Rewards programs encourage you to spend money with your credit card by offering reward points in return. These points can be redeemed for flights, accommodation bookings, purchases at online stores, and more. If you’ve collected the points, they’re yours to spend as you’d like.

What’s the difference between a credit card and a debit card?

A regular credit card lets you purchase goods and services with money from your lender. You’re obligated to pay this money back each month. When you use a debit card, however, you’re using funds from your own bank account. That makes your debit card fairly risk-free to use.

What’s a premium credit card, and should I get one?

Premium credit cards aren’t too different from regular credit cards, except they tend to have higher spending limits and exclusive benefits (such as personal shoppers).

Learn more about premium cards, and whether or not you qualify for one.

What is a cash advance?

A cash advance is when you use your credit card to withdraw money from an ATM. Yes, it’s incredibly convenient to withdraw money you can pay off later! Keep in mind, however, that your lender will charge you interest on this cash the day you withdraw it.

How can I pay off my credit card?

Credit card interest will forever be your number one priority when paying your credit card bill. Whenever possible, pay off your full balance each month to avoid it. If you’re dealing with existing credit card debt and it’s only getting worse, instead consider a personal loan or utilise a balance transfer.

How can I find the best credit card for me?

Ask yourself these questions, and you’ll have a better idea of what kind of card will suit your circumstances.

  1. Will I pay off my credit card balance each month? If you’re the kind of person who diligently pays off their credit card balance at the conclusion of the billing cycle (or interest-free period), then finding a card with a low-interest rate won’t be a priority. Instead, search for a low or no annual fee credit card. If, however, you’ve struggled in the past to pay off your credit card bill, consider getting a card with a low-interest rate instead. Or better yet, consider a card that’s interest-free.
  2. Do I spend enough money to get value from a credit card rewards program? Credit card rewards are best leveraged when you spend as much as possible each year on your card, so you can get the most points possible. For Australians who spend big, and pay their cards off on time, then they should absolutely compare reward cards.
  3. Do I have any outstanding credit card debt to manage? Credit card debt may lead to a poor credit score, which can restrict your choice in cards you can apply for. If this is the situation you’re in, consider a balance transfer card to consolidate and chip away at your existing debt. This will help resolve your credit rating issues, and (hopefully) mean your options for different cards open up in the future.

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