Understanding credit

Things to understand before you apply for a credit card

Credit cards can be a handy way to pay for goods and services. They act as a short term cash flow by giving access to borrowed money.

Once approved, a credit card allows you to spend up to a set limit with minimum monthly repayments and the flexibility to pay extra.

They're generally cheaper than short term finance (like ‘pay day' loans) and more expensive than secured loans (like car or home loans). 

Is a credit card the best choice?

Whether a credit card is the right choice for you, largely depends on how long you think it will take to pay off.

This type of ‘revolving credit’ may be convenient in the short term, especially when you pay off the balance in full each month.

However, holding credit card debt over the longer term can be damaging to your long term financial goals – and keep you in ongoing debt without ongoing benefit.

Learn more about managing credit card debt

Here to help with budget planning

Our focus is to help you access the money you need and manage your credit in a way that works for you. In fact, we want to help you pay off your debts as soon as possible! 

That’s why we’re here to help with any questions you have about the best way to budget for your future. Simply contact a Mine Wealth + Wellbeing financial adviser for more information. A range of free budgeting information, tools and advice are available, with a fee applying for in depth support and advice. 

What do you need to know?

Before choosing to apply for a credit card, please consider:

Your budget

How much will you need to repay each month? Prepare or check your budget to see what you can afford and make sure you don’t overextend yourself.

Aim to pay off your balance each month if possible. If you can’t pay off the full balance each month, a low rate card can help you save interest until you can.

Choosing a card type

Financial institutions partner with various companies to provide cards including MasterCard ®, Visa or American Express ®. Providers usually have two main types – cards with both low rates and fees or cards with awards and higher rates.

Credit limit

When you apply for a card, you’ll be asked how much credit you want available to use. This is known as your credit limit. When your application is considered, you might be given a smaller limit if there’s any concern you mightn’t be able to afford the amount you’ve asked for.

Fees and costs

Charges apply to borrowing money or using credit. Make sure you understand the charges for any cards you have or are considering. This includes interest rates (which can be different for purchases and other types), annual fees and penalties.

Interest rates

  • Purchase rate: this is the amount of interest you’ll pay for buying things with your card
  • Cash advance rate: for any money you draw as cash from your card, if available. Interest is usually charged from the date of the cash advance
  • Introductory rate: some cards offer low interest rates when you join, which then revert to either the standard or cash advance rate after a set period of time
  • Balance transfers: are when you transfer the outstanding balance from one card to another. These are often available at lower rates for a set period, then revert to higher cash advance rates. If applying for a balance transfer, make sure that you’ll be able to pay it off in full before the offer period runs out

Annual fees

These are charged each year on the anniversary of your card being issued. Generally low rate cards also come with lower annual fees, and rewards cards attract higher annual fees.

Penalty rates

Fees can apply for things like late payments and spending more than your limit. Check the potential penalties that apply to your card before using it to avoid getting caught out.


Each month you’ll receive a statement showing your account balance and minimum repayment. While it might be tempting to make only the minimum payment, it's usually a good idea to pay off the full balance if you can.

If you can’t pay the full balance, we recommend still paying more than the minimum balance if you can. By doing this each month, you could save yourself a lot of interest which will be payable on any outstanding balance.

Choosing a card type

Financial institutions partner with various companies to provide cards including MasterCard ®, Visa or American Express ®.

Providers usually have two main types – cards with both low interest rates and fees or cards with rewards and higher rates.


All applications are subject to approval, so before you get started, have details about your employment history, income and any other financial obligations ready.


American Express® is a registered trademark of American Express.
MasterCard® is a registered trademark of MasterCard International Incorporated