The main types of credit cards in Australia are rewards cards, frequent flyer cards, low interest cards, balance transfer cards, no annual fee cards and business cards.
Key takeaways
- Credit cards come in different types to suit different financial needs.
- Features like rewards, interest rates, and fees are key factors to consider.
- Responsible use of credit cards can help improve your credit score and financial management.
Standard credit cards
Standard credit cards are the most common type of credit card. They let you make purchases and pay later. You can carry a balance from month to month, but interest charges apply.
These cards often have no annual fee. They're good for everyday spending and building credit. Interest rates vary, so it's smart to compare credit card offers.
Standard cards may include basic perks like purchase protection or price protection. They're a good starting point if you're new to credit cards.
Rewards credit cards
Rewards cards give you something back for your spending. You can earn points, cashback, or frequent flyer miles.
Popular rewards include:
- Travel points for flights and hotels.
- Cashback on groceries or petrol.
- Gift cards or merchandise.
Some cards offer bonus points for certain spending categories. Others give a flat rate on all purchases.
Rewards cards often have higher interest rates and annual fees. They work best if you pay your balance in full each month.
Balance transfer credit cards
Balance transfer credit cards help you save on interest. You can move debt from other cards to a new card with a low or 0% interest rate.
Key features:
- Low intro rate for 6-24 months.
- Possible balance transfer fee (usually 1-3%).
- Higher interest rate after the intro period ends.
These cards can help you pay off debt faster, but a repayment plan is essential. Aim to clear the balance before the low rate expires.
Some cards also offer low rates on new purchases, which can be handy if you need to make a big purchase.
Frequent flyer cards
Frequent flyer cards are linked to airline loyalty programs. You earn points or miles for your everyday spending. These can be used for flights, upgrades, and travel perks.
Many cards offer bonus points when you book with specific airlines. Some give you airport lounge access or travel insurance. The value of these cards depends on how often you fly.
Popular Australian frequent flyer cards include those tied to Qantas Frequent Flyer and Velocity Frequent Flyer programs.
Cashback Cards
Cashback cards give you a percentage of your spending back as cash. This is often credited to your account or taken off your bill.
Some cards offer a flat rate on all purchases. Others give higher rates for specific categories like petrol or groceries. You might get $50 cashback each month for the first few months after approval.
Cashback is simple to understand and use. You don't need to worry about points expiry or redemption options. The downside is that cashback rates are usually lower than other reward types.
Business Credit Cards
Business credit cards help companies manage their spending and cash flow. They often come with higher credit limits and expense tracking tools. Many offer rewards on common business expenses like office supplies and travel.
Key features of business credit cards:
- Separate personal and business expenses.
- Multiple cards for employees.
- Detailed spending reports.
- Travel insurance and purchase protection.
These cards can help you build business credit. Be aware that some have high annual fees and make sure the benefits outweigh the costs for your company.
Student credit cards
Banks offer student credit cards for university students. These cards usually have lower credit limits and income requirements, help students build credit responsibly and they're meant to be easier to get approved for.
Student credit cards often have:
- No annual fee.
- Lower interest rates.
- Budgeting tools.
To get one, you'll need to prove you're enrolled in university. Some cards convert to regular accounts after graduation. Always pay on time to build a good credit history.
Charge cards
Charge cards are a bit different from regular credit cards. You must pay the full balance each month. There's no interest because you can't carry a balance.
Charge cards typically offer:
- No preset spending limit.
- Premium rewards and perks.
- Travel benefits.
- Higher annual fees.
These cards suit big spenders who always pay in full. They're not for everyone. You need a good income and credit score to qualify. Make sure you can afford the yearly fee before applying.
Credit card issuers and networks
Credit card issuers and networks play different roles in the credit card ecosystem. Knowing the difference can help you choose the right card for your needs.
Banks vs non-bank issuers
Credit card issuers are the financial institutions that provide credit cards to consumers. Banks are the most common issuers, offering a wide range of cards with different features and benefits.
Examples of bank issuers in Australia include:
Non-bank issuers also exist in the market. These include:
Non-bank issuers often partner with banks to provide their credit card products. They might focus on specific rewards programs or target particular customer segments.
Visa and Mastercard
Visa and Mastercard are the two largest credit card networks globally. They don't issue cards directly to consumers but provide the payment processing infrastructure.
Key points about Visa and Mastercard:
- Widely accepted worldwide.
- Work with many different issuers.
- Offer similar features and benefits.
- Compete on technology and merchant relationships.
Both networks provide security features like zero liability protection for unauthorised transactions.
American Express and Diners Club
American Express (Amex) and Diners Club operate differently from Visa and Mastercard. They act as both the network and the issuer for most of their cards.
Amex:
- Known for premium rewards and benefits.
- Generally higher annual fees.
- Less widely accepted than Visa or Mastercard.
- Partners with some banks for co-branded cards.
Diners Club:
- Smaller network with limited acceptance.
- Focuses on corporate and travel-oriented cards.
- Now owned by Discover Financial Services.
