APR’ means Annual Percentage Rate. Interest on carried-over credit card balances, and on new purchases if you already have a carried-over balance, is actually calculated daily and charged monthly. The APR is the equivalent rate expressed as an annual figure.

Will the interest rate on my credit card always stay the same?

No. Credit card interest rates are variable and can change at any time. And special introductory interest rates on balance transfers and purchases always have an expiry date, at which point the revert rate (the standard rate for purchases or cash advances) comes into play.

What’s the best way to compare credit cards?

First of all, decide which type of credit card would work best in your current circumstances, based on your income, lifestyle and spending pattern. For example, if you don’t expect to regularly pay off your purchases balance in full, it wouldn’t make sense to choose an expensive rewards card with a high interest rate, because the annual fee and interest costs will be far higher than the value of any rewards you could earn. But if you travel a lot and intend to clear your balance every month, a frequent flyer points card with free travel insurance and airport lounge passes might work well for you. So narrow your choices down by deciding on which card features are most important for you. Your ideal card may have one or more of the following features: 0% purchase introductory offer period Balance transfer introductory offer period Rewards points Frequent flyer points Sign-up or first purchase bonus points Ongoing low interest rate No or low annual fee No foregn transaction fees Complimentary benefits for travellers and/or shoppers Available with Google Pay, Apple Pay or Samsung Pay Once you’ve narrowed your choice by deciding which type, or types, of card will suit you best, you can compare their interest rates, annual fee, points earning rates (if any) and complimentary benefits (if any), to see which one is offering the best deal.

Will my credit rating affect the success of my credit card application?

Yes. The card provider is almost certain to check your credit score, and may even order a copy of your credit history file from one of the Australian credit bureaux. The higher your score, the more likely it is that your application will be successful. You can order a free copy of your credit history report once per year from any of the credit reporting bureaux: Experian, Equifax, Ilion, Tasmanian Collection Service. And you can check your credit score as often as you like here.

What if I have a low credit score, or no credit score?

If you have a low credit score, or no score because you’re a recent arrival in Australia, or a student, or someone starting their first job, you’re not going to qualify for the best credit card deals. Your choice may be limited, and you may be offered a low credit limit and a high interest rate. But there are credit cards specially designed for beginners and low credit scores. By using one of these ‘starter’ cards responsibly (i.e. always repaying your purchases balance in full and trying to avoid maxing out your credit limit), you will build up your credit score over time and become eligible for better deals.

Are there any penalties for missing a repayment, or paying late?

Yes. If you fail to make at least the minimum repayment (usually a small percentage of the balance owing, or a small fixed amount) on or before the payment due date, you may be hit with a penalty fee of between $5 and $35 per event. You could also risk having a promotional deal, such as an introductory interest rate, cancelled. Avoid this by setting up a direct debit for an amount that will at least cover the minimum repayment.

What is a joint credit card?

A true joint credit card is where two people are equally responsible and linked to one line of credit account. What this means is that either of you can make purchases on the card. But more importantly, each party is equally responsible for any balance due on the card and either person can make changes to the account. (Although there are a few instances, like closing the account, which need both cardholders to approve.) Remember, this is different from having an additional cardholder in your credit card applicaiton. When considering your application, lenders will take into account both parties’ incomes and credit scores. And the details of your credit card account will appear on each of your credit reports. If you miss a payment and can’t pay off the balance, the lender can pursue both of you for payment. If one person on the account doesn’t use the card responsibly then both of your credit scores could be affected. Because of this, joint credit cards should be considered a substantial commitment. You should only get one with someone whom you trust implicitly. We take a look at the advantages and disadvantages of joint cards. And explore an alternative option that allows almost the same benefits as a joint card, without as much risk.

What are the benefits of a joint credit card?

While a joint credit card is a big commitment there are some times when it might be the best option for your circumstances. Here are a few of the reasons it could work for you. If one person in a couple doesn’t have a good credit score, but the other person’s score is high, then a joint application gives the person with the lower score a better chance of being approved (when compared with applying separately). If you don’t know your credit score you can get it for free here . Continuing on from the last point, someone with a lower credit score can access more favourable terms when partnering with someone with a very good score. This could be in the form of a better interest rate or a higher credit limit based on two incomes. You’ll only have one annual fee to pay, instead of paying a fee for each if you get separate cards. It can make it easier for couples to get an overall picture of their financial situation and stick to a joint budget – making it a way to simplify your finances and better manage joint payments from the one account. You can earn rewards faster when two people spend on one account . . . which means flying Business Class on points sooner! Both cardholders are able to redeem rewards. For some people, it may help to reduce the temptation to spend too much, because there are no secrets between them and their partner. You can work together towards a common goal. For business owners with personal liability, a joint card can provide access to greater credit capacity on a personal credit card. While all of these benefits can have you reaching for the pen and signing on the dotted line, it’s time to step on the brakes for just a moment. We take a look at why you should avoid having a joint credit card and what the risks are.

Disadvantages and risks of a joint credit card

And now comes the bad news – sorry it has to be done! Life isn’t always a bed or roses and it’s not uncommon for two people in a partnership to have very different attitudes towards money. So getting a joint credit card can end up being a disaster for both your relationship and your credit rating. Here are some of the risks that you should be aware of. We touched on it at the start of the article – a joint credit card means shared debt. You are both legally responsible for the full balance owing. So if the other cardholder goes on a spending spree, your run the risk of taking on a debt that you didn’t rack up. Resentment can build up between one cardholder who is responsible and the other who splashes on the plastic a little too much. With two people using the card at the same time, you’re more likely to go over your credit limit. You should ensure you are both tracking at least the account balance on a regular basis. Any missed payments will affect both account holders’ credit scores, because you are both equally responsible for paying off the card balance, regardless of who incurred the charges. Disagreements over the card can cause problems in a relationship. If both partners are not on the same page about how much to spend or who is making the payments, then tension and stress can arise. A spender combined with a saver can be a relationship disaster. A joint credit card only works when both parties are prepared to be responsible for each other's spending. If your relationship with the person you have the joint card with changes, such as the case with a breakup or divorce, you will need to close the account or work out how to handle it. There is a risk one may use the card to hurt the other by spending more than they can afford. So if your ex isn’t paying the debt, you are still liable. And for credit card rewards chasers, you could be missing out on the opportunity to get double the sign-up bonus points which you could get by both applying for your cards individually.

Will a joint credit card affect my credit score?

Yes, it can. For some, this could be a positive thing, for others it won’t be so good. So it depends whether you are starting with a lower score or if your score is excellent. The first thing to mention is that you don’t ever have a joint credit score or a joint credit history. Each individual has their own credit score and a joint account is listed on each person’s individual credit file as a joint applicant and cardholder. From the time when you first apply for a joint card, if you or your partner happen to have a really low credit score then your application could be declined. Since you and your partner are being assessed jointly, a bad score could outweigh an average or good one. When you are rejected for credit this will appear on your credit report and can reduce your score. Check out for free what your current score is before you apply for a loan. The moral of the story is, make sure you are both aware of your scores before you apply! For those with a score on the lower side, a joint account can help to repair your credit score over time. If the account is kept in good standing and payments are made on time, your score can lift as time passes. So it can be a useful tool to establish creditworthiness for someone who needs it. The actions you and your partner take with joint loans and credit cards may affect your score. Because you both share legal responsibility for the account if payments are missed by the due date, both scores could be affected.

Won’t I miss out on the chance for more points if I don’t have a joint card?

By now you might be weighing up whether a joint card is worth it. It can sound appealing to both earn points to help you reach your goals sooner. But there is an alternative option that could get you there just as fast. The middle ground may be to apply for a credit card on your own and add a supplementary or additional cardholder. There is sometimes an additional fee for doing this, but other cards come with free supplementary cards. With two people spending on the card you’ll double your rewards earning potential. Most credit card issuers offer this option and it means you’ll become the primary account holder, and your partner will be a secondary cardholder. But you’ll be the only person responsible for managing the account and redeeming rewards. The authorised user has no liability for the debt owing on the card. But because the secondary cardholder is able to spend on the card, you need to make sure you are only giving a card to someone you trust completely. But, as mentioned above, by applying for separate credit cards you can both individually take advantage of any sign-up bonuses on offer.

Should we apply for a joint credit card?

That’s something you’ll need to weigh up depending on how responsible you are with credit. There isn’t anything wrong with sharing a card with someone you trust. It can be a great way to boost your rewards points and have transparency in your financial life. However, a joint credit card brings with it a number of risks in having two people being jointly liable for any debt. But if one of the joint applicants has a lower credit score or would find it hard to get credit on their own, it can be a worthwhile option where available. So the middle ground of one person having their own card, with the other person as a supplementary cardholder, may be appealing. The main consideration is choosing a card that suits your financial needs.

How can I apply for a credit card?

You can apply in person at a branch of the credit card provider (e.g. at a bank), by mail or by telephone. But the easiest and quickest way to apply is online, which you can do right here by clicking the ‘Application’ button next to your chosen card.

Credit Card Comparison | Compare Cards & Apply Online

Overview

A credit card is a small, rectangular piece of plastic that confers on its owner the ability to borrow money from a bank (or other lender) to use when paying for goods and services. (Even if you choose to pay with your mobile device, your bank still needs to send you that piece of plastic – for now.)

Repayment

On a due date specified by the bank, the credit card owner can choose whether to repay in full the accumulated balance of their purchases for the month, or make only a minimum repayment (typically 2% or 2.5% of the balance, or a fixed amount such as $5) and pay interest for continuing to borrow the remaining balance.

Payment due date

The due date for repayment usually falls between 14 and 25 days after the end of the monthly billing cycle. For this reason credit cards are often described as having ‘up to 44 days interest free’ or ‘up to 55 interest-free days’.

Interest charges

The money borrowed via the credit card, to make purchases, is free of interest charges from the date of the purchase transaction until the payment due date, provided the card account does not already have any carried-over debt from the previous month (such as an unpaid purchases balance or a balance transferred from another card).

If however, there is a debt carried over from the previous month, interest is charged on every purchase transaction, calculated from the transaction date until the repayment date. This applies unless there is an introductory offer in place which makes the purchases interest-free for a specified number of months, despite the carried-over debt – see ‘0% purchase credit cards’.

Clearly, the best way to use a credit card is to pay off the purchases balance in full every month, using the bank’s money totally free of interest charges for up to eight weeks after a purchase is made.

Interest rates

Credit card interest rates (charged on carried-over debt and also on new purchases where there is existing carried-over debt) are typically higher than the rates for other forms of borrowing, such as home loans and personal loans – in some cases very much higher. Credit card interest rates in Australia mostly fall in the range 10% p.a. to 22% p.a., although there are a few cards with rates lower and higher than this range.

Cash advances

If you use your credit card to make a cash withdrawal from your credit card account (either over-the-counter or via an ATM), this transaction is called a ‘cash advance’ and is never interest free. Interest is charged from the withdrawal date until the repayment date, even if there is no carried-over debt on the account.

Additionally, many cards have a cash advance interest rate that is higher — often by as much as 2% p.a. – than the interest rate charged on purchases debt.

Credit limit

All credit cards come with a credit limit, typically anywhere between $1,000 and $100,000. The card’s limit is based on the cardholder’s annual income and the bank’s assessment of their creditworthiness and ability to repay the amounts borrowed.

Once the card’s credit limit is reached (that is, once the total amount owing on the card is equal to the credit limit, or when the difference between the credit limit and the amount owing is less than the amount of an attempted new purchase), no further purchases can be made with the card until some of the balance owing has been repaid.

If you think your credit limit is too low, you can apply to the bank to increase your credit limit once you have had the card for a while and managed it responsibly, by making at least the minimum repayment on time every month and paying off large parts of the balance on a regular basis.

Annual fee

Many credit cards, especially those awarding rewards points on purchases and/or conferring complimentary benefits (e.g. free travel insurance), charge an annual fee. The fee can be anywhere between $30 and $1,500 or more, depending on the points and benefits attached to the card. However, some cards have no annual fee.

Credit card types

There are credit cards to suit the lifestyle and spending patterns of a wide variety of cardholders. Some of the most common types are:

0% purchase credit cards: No interest is charged on purchases for an introductory period, so the carried-over balance is interest free until the introductory period is over.
Balance transfer credit cards: Special introductory interest rate (often 0%) for a specified period, on balances transferred from other cards.
Rewards credit cards: Loyalty points, redeemable for rewards, are earned when purchases are made.
Frequent flyer credit cards: Air miles, redeemable for flights or rewards, are earned when purchases are made.
Low interest credit cards: Cards whose interest rate on carried-over debt is at the lower end of the scale.
No annual fee credit cards: Cards with $0 annual fee.

Alternatives to credit cards

Although credit cards are very popular, and are the preferred payment method for online shopping in particular, they are not the only way to pay. Other ways to pay for purchases include:

Cash. Widely accepted, but can be a security risk to carry around, and no good for paying online.
Charge card. Similar to a credit card, but without the option to carry over a balance at the end of the month and pay interest on it. American Express offer several of these.
Debit card. Looks like a credit card, but linked to your bank transaction account so that you pay with your own money.
Prepaid card. A payment card used like a debit card, but preloaded with a fixed amount of cash rather than being linked to a bank account.
PayPal. Online payment service that can be linked to a credit card, debit card or bank account. Especially popular as a form of payment on marketplaces such as eBay and Facebook Marketplace.
Buy Now Pay Later (BNPL). Popularised by Afterpay and Zip in Australia, these schemes offer payment by instalments, with no interest charges but high fees if you miss payments.
Personal loan. A good option for major purchases (furniture, appliances, technology, holiday) if you need time to pay, because the interest rate for a personal loan is usually lower than that of a credit card.

Credit cards vs debit cards

Both credit cards and debit cards have their advantages and disadvantages.

The benefits of a credit card are the possibility of using the bank’s money free of interest charges for 44 or 55 days (the length of time varies depending on the card), provided you always repay your account balance in full each month. Many credit cards also come with attached additional benefits, like rewards and frequent flyer points, free insurance, travel discounts and privileges, and other perks. Responsible use of a credit card can help improve your credit score. But credit card interest charges, if incurred, are mostly very high, and in the wrong hands a credit card is a temptation to overspend and end up in long-term debt.

Conversely, debit card users are far less likely to get into debt, simply because their spending is limited to the amount of money they have already earned and deposited in a bank account. They are not borrowing a bank’s money when they use their debit card (unless the debit card is attached to an overdraft account), but simply accessing their own funds in a bank account linked to the card. At the end of the month there is no bill to pay, and no interest charges to avoid. However, the vast majority of debit card users miss out on rewards points and other credit card benefits, and will not improve their credit score by using their card.