Credit card confusion? We’ve cleared up Aussies' main misconceptions

Kelly Emmerton   |   06 Dec 2018

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With Christmas fast approaching, Aussies are spending up a storm and some of them are breaking out the plastic to do so. But it seems we aren’t the savviest bunch when it comes to the nitty-gritty of credit cards.

Recent research from online bank ME has revealed that not only do 70% of Aussies admit to bad credit card behaviours like not paying off their balance in full or hitting up the ATM with credit card in hand, but 38% also got 6 basic credit literacy questions wrong too.

“Credit cards can help people manage cash flow, earn rewards for everyday purchases, and make purchases online, all of which helps them get ahead. It’s when people use them unwisely that problems can occur,” said ME General Manager of Cards and Payments Michael Hendricks.

So now that ME discovered some of the top misconceptions Aussies had when it came to credit cards, we thought we’d lay them to rest.

1. 44% did not know which credit card to pay off first when faced with multiple cards at different rates

This one’s tricky, but according to ASIC’s MoneySmart website you should start by paying off either the card with the smallest debt or the card with the highest interest rate. Whichever you choose to tackle first, make sure you’re still meeting the minimum repayments on all your cards!

2. 41% thought all credit cards had an annual fee

Not true! There are a heap of great credit cards with no annual fee at all. These cards are great for spenders who will pay off their balance in full each and every month, because then you can use a credit card without paying anything extra!

3. 35% did not realise missing a credit card repayment may affect their ability to get a home loan

While one missed repayment won’t suddenly mean your credit score plummets, a pattern of missing repayments can damage your credit history and make it harder to get any kind of loan in the future.

4. 33% thought having a credit card means they’re always in debt

Most credit cards come with interest free days. Although you do technically owe your card provider the balance on your card, as long as you repay your balance within that interest free period, you won’t pay extra for it, and it won’t be marked as an outstanding debt on your credit history.

5. 27% thought credit card rates are set by the Reserve Bank of Australia

The Reserve Bank of Australia sets the official cash rate, which lenders use to set their lending rates. This affects home loans the most, and in practice doesn’t really affect your credit card rate much at all. The RBA’s cash rate is 1.50% at the moment, while the average credit card rate is 17% - a big difference!

6. 9% did not realise credit scores apply in Australia

While they’re not something everyone keeps close tabs on in Australia, credit scores are still important when you apply for a credit card or loan. Australia has recently moved to a Comprehensive Credit Reporting model or CCR, which gives banks and lenders a better picture of your financial history.

“Another key finding was the inability of many people to choose the right credit card based on their current circumstances,” said Hendricks.

“While 82% thought they had the right credit card for their particular needs, the survey highlighted that most would not select the credit card most appropriate for a given scenario. For example, selecting a rewards card (which typically charges higher interest rates) for a cardholder that normally doesn’t pay off their card in full each month.”

If you’re not really sure what plastic you should be using, head over to our guide on which kind of credit card is best for you (we won’t tell!) Or, if you’re sure you know what kind of plastic you’re looking for, our credit card comparison tables will help find the right card for you.

Credit cards offers today - rates updated daily

  • Apply By 07 January 2019

    American Express Explorer® Credit Card

    0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    20.74% p.a.

    $395

    Generous perks include a massive 100,000 bonus points when you apply online by 7 January 2019 and meet the spend criteria, a $400 Travel Credit each year, 2 complimentary Amex Lounge passes and more! Note: point redemption rates will change as of 15 April 2019, please visit the Amex website for more information.

    • 0% p.a. for 12 months and then 20.74% p.a. (1.00% balance transfer fee)

    • $395

    • 20.74% p.a.

    • 55

    • Transfer points to a range of airline programs or redeem your points for travel, gift cards, retail rewards and shopping gift cards.

    Details Close

  • Hot Deal $50 Woolies eGift Card when you spend $150 a month for 3 months

    Woolworths Everyday Platinum Credit Card

    0% p.a. for 14 months and then 21.99% p.a.

    19.99% p.a.

    $49 $0 in the first year

    Perfect for practical spenders, pay no annual fee in the first year and save up to $50 on your Woolies shop each month. Plus new cardholders can score a $50 Woolies eGift Card when you spend $150 a month for the first 3 months. Too easy!

    • 0% p.a. for 14 months and then 21.99% p.a.

    • $49 $0 in the first year

    • 19.99% p.a.

    • 55

    • 21.99% p.a.

    • 3%, minimum $5

    • Woolworths Money Shopping Card sent every 4 months if enough points have been accrued.

    Details Close

  • Australian Military Bank Low Rate Visa Credit Card

    0% p.a. for 12 months and then 11.99% p.a.

    11.99% p.a.

    $49

    A great card for everyday spending, with a compeititve low interest rate and up to 55 interest free days on your purchases. A great choice for savvy spenders in a hurry, apply online for a quick assessment.

    • 0% p.a. for 12 months and then 11.99% p.a.

    • $49

    • 11.99% p.a.

    • 45

    • 19.99% p.a.

    • $4.50

    Details Close

  • Bankwest Breeze Platinum Mastercard

    0% p.a. for 13 months and then 12.99% p.a. (2.00% balance transfer fee)

    0% p.a. for 13 months then 12.99% p.a.

    $99

    Streamline your budget with a low ongoing interest rate, up to 55 interest free days and 0% p.a. on balance transfers for 13 months. Plus, travel with free international travel insurance for you and your family by buying your tickets on your card.

    • 0% p.a. for 13 months and then 12.99% p.a. (2.00% balance transfer fee)

    • $99

    • 0% p.a. for 13 months then 12.99% p.a.

    • 55

    • 21.99% p.a.

    • 2%, Min $4.00

    Details Close

  • ANZ Low Rate

    0% p.a. for 15 months and then 21.74% p.a.

    12.49% p.a.

    $58

    With a low interest rate on your purchases and 0.0% p.a. on balance transfers for the first 15 months (T&Cs apply), this card makes for easy everyday spending. Apply online in just five minutes, and receive an answer in 60 seconds.

    • 0% p.a. for 15 months and then 21.74% p.a.

    • $58

    • 12.49% p.a.

    • 55

    • 21.74% p.a.

    • 2%

    Details Close

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