Credit card tips for absolute beginners

Your first credit card doesn’t need to be confusing. We’ll break down the basics – from choosing the right card to avoiding fees – so you can take out a credit card with confidence.

Pick a card that suits your needs

Most credit cards have one main perk – usually a low rate, low fees or a rewards program – that make them better suited to certain spending and repayment habits.

Low rate

These are great if you don’t think you’ll pay your full balance each month, or if you want to use your credit card to pay off a large purchase, because you’ll pay less interest than on other cards. Keep in mind that low rate cards usually come with an annual fee, so make sure you shop around to find one that fits your budget.

Low fee

With no annual fee, you can use more of your funds to do what you want. These are good if you think you’ll pay off your balance each month, because they generally have a higher interest rate.

Rewards program

If you plan to use your credit card for your everyday spending, a rewards card could be great for you - it means you’ll earn points while you spend. Rewards cards usually have a higher interest rate, so it’s important to make sure you pay your balance each month. They also usually have a higher annual fee.

Know your limits

When you apply for a credit card, we’ll ask you what you’d like your credit limit to be. This is the most you can spend on your card without paying some off, so it’s important to choose a limit you’re comfortable with.

No matter what your limit is, you’ll want to avoid overspending and getting yourself into debt you can’t pay back. You don’t have to pay your full balance each month, but the more you pay off the less interest you’ll be charged.

It’s also good for you to get an idea of your monthly income and how much of it you can put towards your credit card payments – especially if you’re using it to pay off a big purchase.

Avoiding interest and fees

The best way to avoid unnecessary fees and interest is to know when they apply. You can find a full list of charges in your credit card T&Cs, but here are some common ones to look out for.

Purchase rate

The interest rate you see in ads is usually the purchase rate, which will be charged to any balance you don’t pay off by your payment due date. To avoid this, you’ll need to pay off your full balance each month. Most credit cards come with an interest free period that you could also use to your advantage.

Cash advances

If you withdraw money from your card (called a ‘cash advance’), you’ll be charged a cash advance rate and fee.

Late payment fee

If you don’t pay at least the minimum monthly payment by your due date, you’ll be charged a late fee.

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The information contained in this article is of a general nature and is not intended to be nor should it be considered as professional advice. You should not act on the basis of anything contained in this article without first obtaining specific professional advice. Also to the extent permitted by law, Bankwest, a division of Commonwealth Bank of Australia ABN 48 123 123 124 AFSL / Australian credit licence 234945, its related bodies corporate, employees and contractors accept no liability or responsibility to any persons for any loss which may be incurred or suffered as a result of acting on or refraining from acting as a result of anything contained in this article.