There are millions of credit card accounts in Australia, according to the RBA. Their financial flexibility means you can extend your purchasing power today and settle the bill later. However, it's important to be aware of their pitfalls and how they can improve or mess up your credit score.
"When choosing a credit card for the first time, narrow down your options and carefully consider their terms and features. Things to look out for include low fees, low interest rates, and a set of criteria you qualify for so your application isn't immediately declined. Check your credit score before applying and hold off applying if it flags up issues that need to be addressed. Applying with a bad credit score because of recent missed payments or a default can impact your credit score and make your application more likely to be declined."
David Boyd
CEO at Credit Card Compare
Benefits of credit cards for first-timers
- Build credit history: Responsible credit card use can help first-timers establish a positive credit history, which is crucial for future financial choices such as applying for a home loan.
- Convenience: Credit cards offer a convenient payment method for online and in-store purchases. For example, travelling without one makes it tricky to check into a hotel.
- Security: Credit cards provide added security features such as fraud protection and the ability to dispute unauthorised charges. If you shop from a store that won't give you your money back, you can lodge a chargeback with the issuer.
- Rewards and perks: Many credit cards offer rewards points, cashback incentives, and other perks to cardholders. However, these are not typically the easiest to get approved for since they usually have a higher set of minimum criteria.
Choosing the right credit card
- Interest rates: Compare the interest rates on different credit cards. Look for low introductory or competitive ongoing rates to save on interest charges should you not pay the balance in full.
- Fees: Consider annual fees, late payment fees, and foreign transaction fees. These can add up.
- Rewards programs: Which rewards program aligns with your lifestyle, spending habits, and preferences? If you are a Qantas and oneworld loyalist, then you might consider a Qantas Points-earning credit card over one that earns Velocity Points.
- Credit limit: Minimum and maximum credit limits vary between different cards. Choose one that suits your financial needs and pattern of spending.
- Additional features: Consider additional features such as travel insurance and airport lounge access that may benefit you.
Responsible credit card use tips for beginners
- Pay on time: Always make payments on time each payment cycle to avoid late fees and negative impacts on your credit score.
- Monitor spending: Keep track of your credit card spending to stay within your budget and to avoid overspending.
- Avoid maxing out: Try and use only a portion of your available credit to maintain a healthy credit utilisation ratio.
- Review statements: Regularly review your credit card statements for accuracy. Identify any unauthorised charges and contact the card issuer immediately if you see anything suspicious.
- Register for SMS or email alerts: That way you will know about every charge that is made on your credit card.
- Seek assistance: If you encounter financial difficulties, contact your card issuer and explore options such as payment plans or hardship programs.
Methodology for our first-timer credit card comparison
To determine rankings in our first-timer credit card comparison table, we considered the following relevant attributes and their associated metadata.
- Annual fee initial year: Whether there is an annual fee in the first year and how much it is. Lower is considered better.
- Annual fee ongoing: Whether there is an annual fee charged each subsequent year to keep the account open. Lower is considered better.
- Apple Pay enabled: Whether the card is compatible with Apple Pay. Compatibility is considered beneficial.
- Card type: Whether the credit card operates on American Express, Mastercard, Visa, etc. because this impacts where it can be used.
- Foreign exchange fee: Whether foreign transactions or transactions in foreign currency attract a fee and how much it is. Lower is considered better.
- Interest-free period: The number of interest-free days from statement close when the balance has been paid in full. More is better.
- Introductory purchase rate: Whether there is an introductory interest rate offer on purchases for a set period, the interest rate, how long it lasts, and what the introductory offer reverts to. A long introductory period of low interest is considered better.
- Late payment fee: If a monthly payment is late, what will the late fee be. Lower is considered better.
- Maximum credit limit: If made available by the issuer, what's the highest credit limit possible on the card?
- Minimum credit limit: If made available by the issuer, what's the lowest credit limit possible on the card?
- Minimum income required: If made available, how much applicants must earn according to the issuer's eligibility criteria. A lower minimum income requirement means a card is accessible to more applicants.
- Purchase rate ongoing: What the interest rate is on any purchases that are not paid off in full. Lower is considered better.
- Rewards program: Whether the card has rewards, the type of rewards (points, cashback, etc.), what they can be redeemed for, etc.
- Samsung Pay enabled: Whether the card is compatible with Samsung Pay. Compatibility is considered beneficial.
- Sign-up bonus: Whether there is a bonus of points, cashback, etc. earned after meeting a certain criteria. A large sign-up bonus can be very valuable.
Our rankings may not reflect what matters most to you. Be sure to compare key rates, fees, and features against your own financial priorities before deciding.
