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

Kelly Emmerton

06 Dec 2018


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.

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