When applying for a credit card, there are a few key things to keep in mind.
Credit cards are not for beginnersÂ
Credit cards can be quite dangerous in the hands of someone who is not all over their own personal finances, or someone who can get easily carried away with unnecessary purchases. Being in a large amount of credit card debt can put you years behind in your personal finance goals and can significantly impact future loans and purchases through banks and lenders.
Your first credit card can either build your credit score, or ruin it
If you are not careful with credit card purchases and repayments, your credit score can be significantly impacted. On the flip side though, responsible use of a credit card can have positive impacts on your credit score, as it provides lenders with proof of your repayment capability and shows consistent on-time payments, which will assist you in getting future loans.
To ensure that your credit card activity helps as much as possible, pay in full and on time at the end of every statement period and stay well below your credit limit. A good rule of thumb is to try to keep your balance under 30% of your available credit at all times.
Ensure you understand the fees and rates before applyingÂ
There are often many fees that come with credit cards. Ensure that you do extensive research and understand the exact fees and rates that are attached to your credit card before applying. These fees could include the following:
Annual fees
Late payment fees
Foreign transaction fees
Cash advance fees
Charges for exceeding your limit
Research the rewards associated with your credit card
Some credit cards offer rewards such as cash back, points or miles for purchases made on the card. Consider what type of rewards are most valuable to you and compare different rewards programs. Some of the most common rewards programs include:
Points programs: Many credit cards in Australia offer rewards points that can be redeemed for a variety of items such as flights, hotel stays, merchandise or statement credits.
Cashback programs: Some credit cards offer cashback on purchases made with the card, which can be credited to the cardholder’s account or used as a statement credit.
Frequent flyer programs: Many credit cards in Australia are linked to frequent flyer programs, such as Qantas Frequent Flyer or Virgin Australia Velocity. These allow cardholders to earn points or miles for flights and other travel-related expenses.
Shopping and entertainment rewards: Some credit cards offer rewards for shopping at specific retailers or purchasing tickets to events such as concerts and movies.
Charity and donation rewards: Some credit cards offer rewards for charitable donations or for shopping at specific retailers that support charitable causes.
Complimentary insurance: Some credit cards offer complimentary insurance for travel, car rental and other purchases made with the card.