A credit card is a plastic card issued by a financial institution like a bank or credit union, to their clients who use it to buy things up to an approved credit limit. They work similarly to credit cards in other countries.
It can be used to make payments in a store, over the phone, in an email or via the internet.
The process of getting one involves:
Apply. To obtain a credit card, you need to apply with a credit card issuer, which can be a bank, financial institution, or credit card provider. The application process typically involves providing personal and financial information, including income, employment details, and identification documents.
Credit Limit. Once your application is approved, the credit card issuer assigns you a credit limit, which is the maximum amount you can borrow on the card. The credit limit is determined based on factors such as your income, credit history, and creditworthiness.
Card Usage. With a credit card, you can make purchases at various merchants, both in-store and online. The credit card issuer pays the merchant on your behalf, and you become responsible for repaying the amount spent. You can also use your credit card for cash advances at ATMs, but this often comes with additional fees and higher interest rates.
Monthly Statements. The credit card issuer will provide you with a monthly statement that summarises your transactions, including purchases, cash advances, fees, and interest charges. It also shows the minimum payment required and the due date.
Repayment Options. You have the flexibility to choose how much you want to repay each month. You can either pay the minimum payment required, a specific amount, or the full outstanding balance.
Always repay the minimum or the interest will add up, making it harder to pay off the balance.
Interest Charges. If you don't pay the full outstanding balance by the due date, interest charges will be applied to the remaining balance. The interest rate, often referred to as the annual percentage rate (APR), is determined by the credit card issuer and can vary based on factors such as the type of card, creditworthiness, and promotional offers.
Fees and Charges. Credit cards may have various fees and charges associated with them, such as annual fees, late payment fees, cash advance fees, foreign transaction fees, and balance transfer fees. It's important to review the terms and conditions of your credit card to understand the applicable fees.
Credit Card Rewards. Many credit cards offer rewards programs that allow you to earn points or other benefits for eligible purchases. These rewards can be redeemed for travel, merchandise, cashback, or other rewards depending on the credit card and rewards program.
Credit Reporting. Credit card activity, including payment history and credit utilisation, is reported to credit bureaus in Australia. It can impact your credit score and creditworthiness, so it's important to use credit responsibly and make timely payments.
Security and Fraud Protection. Credit cards come with security features and fraud protection measures to safeguard against unauthorised transactions. Cardholders are typically not liable for fraudulent charges if they report them promptly.
It's important to manage your credit card responsibly, pay your bills on time, and avoid excessive debt. By using credit cards wisely, you can benefit from their convenience, build credit history, earn rewards, and manage your finances effectively.
Getting started
Log into Otivo and go to Debt. After you've entered some details, use the comparison tool to see what's available in the market.
It's important to carefully consider your financial needs, evaluate the terms and interest rates offered by different lenders, and assess your ability to repay before choosing the type of personal loan that best suits your circumstances.
We recommend you read the relevant Product Disclosure Statement (PDS) or offer documentation before taking up any financial product offer. Target Market Determinations can be found on the provider’s website.