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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Ask yourself these questions, and you’ll have a better idea of what kind of card will suit your circumstances.
American Express
ANZ
Bank of Melbourne
BankSA
Bankwest
David Jones
HSBC
NAB
St. George
Westpac
Woolworths