Credit cards

Understand how credit cards work

Credit cards are easy to get and easy to use. They let you carry less cash and buy things over the phone or online. But keep track of your spending and make sure you can pay off what you owe.

How do credit cards work?

Credit cards allow you to borrow money up to a certain limit as long as you make regular minimum repayments. Most credit cards have an annual fee.

Credit card interest rates explained

Credit cards tend to have higher interest rates than other forms of credit, and the rate can vary depending on what features the card offers. You are charged interest on all outstanding transactions if you don't pay your full balance each month.

If you have a credit card without an interest-free period, you pay interest either from the day you make a purchase or from the day your monthly statement is issued.

Unless you use a card that is interest-free and fee-free, buying items with a credit card will always cost you more than if you pay with cash.

Credit card minimum repayments

If you make only the minimum repayment on your credit card each month, you will pay more in interest and it will take longer to pay off your balance. Your monthly statement must give you information about how long it will take to pay off the entire balance by making minimum repayments.

Find out how much you can save by paying more than the minimum repayments.

Credit card calculator

Stopping unsolicited credit card offers

By law, credit card issuers cannot send you invitations to increase your credit limit without first getting your agreement. This applies to both new and existing credit cards.

Even if you do agree to receive credit limit increase invitations, you can change your mind at any time by contacting your card issuer and asking them to stop sending credit offers.

Whether you decide to opt in or out of receiving credit offers, you can ask your card issuer for an increase to your credit limit at any time.

You could also end up spending more than you can repay if you get a higher credit limit than you need.

Video: Scott Pape's credit card challenge

Video about dealing with credit card debt.

Take up Scott Pape's money challenge to help you pay off credit card debt.

Transcript: Scott Pape's credit card challenge

Dual purpose cards (credit and debit)

Some credit cards can also be linked to your deposit accounts and used as a debit card.

If you want to pay by debit you should insert your card into the EFTPOS machine at the checkout and select 'SAV' or 'CHQ'.

If you want to pay by credit you can either tap or wave your card over the payment terminal (if you have a contactless card) or you can insert your card into the EFTPOS machine and select 'CR'.

If you use your card on a contactless terminal (PayPass or payWave) you will always be paying by credit.

Find out more about contactless cards.

Credit card PIN only changes

From 1 August 2014 you must enter a PIN to authorise transactions on credit card and debit card purchases when you are buying a product at a point of sale. Your signature is no longer accepted as authorisation for the purchase.

This change only affects transactions where you're physically present at the point of sale and if the card you're using has an embedded smart chip. You'll continue to sign when using chip-less cards with a magnetic strip at the back.

This change does not impact online shopping, telephone purchases or contactless card transactions such as Visa's payWave and MasterCard's PayPass where you wave your card or tap and go.

Problems with your credit card PIN

Forgot your credit card PIN?

If you forget your PIN, contact your bank or card issuer to organise a new one. Your PIN should be difficult to guess and not associated with any known information about you.

Using a credit card with a disability

If you have problems remembering a PIN or have a disability that makes signing your credit card difficult, contact your card issuer to discuss your options.

If you have questions about the security of using a PIN, speak to your card issuer.

See unauthorised and mistaken transactions if you have purchases on your card that you cannot account for.

Using a credit card overseas

Be aware that your PIN might not work when you use your credit card overseas. Depending on the overseas merchant, you may still need to use a signature to authorise purchases.

How to choose a credit card

See how to choose a credit card for tips on how to decide which credit card is right for you.

Credit card management

See smart ways to use your credit card for tips on how to make your credit card work better for you and avoid costly fees and interest. You can also find out how to pay off multiple credit cards.

If you're worried about spending too much, a debit card might suit you better.

Remember to check your credit card statements carefully to make sure you are being charged correctly. Contact your credit provider immediately if you find any transactions you didn't make. See unauthorised and mistaken transactions for more details.

Video: Take control of your money with the credit card calculator

Video about credit card calculator

Work out how much time and money you'll save by making higher repayments on your credit card using our credit card calculator.

Transcript: Take control of your money with the credit card calculator

Shop around for a credit card that's right for you, and remember to check the fine print.

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Last updated: 31 Jul 2017