Choosing a credit card

To choose the best credit card for you, understand your spending habits and how you will pay it off.

The cost of credit cards

Australians love credit cards. According to the Reserve Bank of Australia (RBA), Australians collectively have around 14.7 million credit cards and owe around $33 billion on them.

However, almost $18 billion of that money is accruing interest – and the average credit card interest rate is over 18%.

So thinking about how you will use your credit card will help you compare the options and get one that suits your spending and repayment habits.

Here are the key steps to follow.

Know how you'll use a credit card

Think about how you’ll use the card before you apply. Will you:

Pay the full balance each month. If you always pay in full, consider a credit card with more interest-free days. These cards may have a higher interest rate and an annual fee, but that could be worth it.

Carry a balance sometimes. If you expect to carry a balance, look for a no-frills card with a lower interest rate and a low annual fee. Lower interest saves you money over time.

Use it for travel or rewards. If you want points or travel perks, check the value of those rewards against higher fees and rates. Rewards cards can cost more – especially if you don’t pay the full balance each month.

Use our credit card calculator to work out the cost of your credit card, based on what you spend and how you pay.

Decide what features you want

Based on how you know you’ll use a credit card, weigh up and compare the features are important to you. Such as:

• Interest‑free days. These only apply if you pay the full balance by the due date.
• Rewards and points. Check how many points you earn, how you redeem them and any caps or expiry rules. Check the fine print of cashbacks or discounts.
• Insurance and extras. Some credit cards come with 'complimentary' extras like travel insurance for overseas trips, or purchase protection. Be aware that extras are usually not free. The cost may be covered by higher interest or fees.
• Introductory offers. Some cards give bonus points or 0% offers for a short time. Read the conditions and the minimum spend required.

Make a short table with the features you care about. That makes it easier to compare cards side by side.

Check the key credit card costs

Compare these costs for any credit cards you consider:

Honeymoon (or introductory) interest rate	the interest rate offered for a limited period of time at the start of a new credit card
Purchase (interest) rate	the interest rate on things you buy (purchases) after the honeymoon period ends
Interest-free days	the number of days you won't get charged interest on purchases
Annual or monthly fee	fee you will pay every year or every month
Rewards program fee	fee for using the rewards program
Other fees	late repayment fees cash advance fees (for cash taken out) fees if you go over your credit limit fees for using your credit card to shop or travel overseas

Set a credit limit you can afford

When you apply for a credit card, your bank or credit provider will offer you a credit limit. This is the maximum amount they'll lend you, and it is based on your ability to pay it back within three years.

If you're worried about overspending, you don't have to take the full amount offered. Think about your spending habits and how much you can comfortably afford to pay back.

Apply only when you’re ready

Here's a quick 'ready to apply' checklist to work through.

check_box I know how I will use the card (pay in full, carry a balance, rewards).

check_box I compared purchase rate, annual fee and other fees.

check_box I checked interest‑free days and reward rules.

check_box I read the key facts and terms or the product disclosure.

check_box I set a credit limit I can afford.

check_box I have a plan to pay off any balance.

 If you're struggling to pay your bills, a new credit card may not be the best move. See managing debt for other options.