How do credit cards work?

We’ve broken down the basics – from what a credit card actually is, to repayments and statements – so you can figure out if a credit card is right for you.

What’s a credit card?

In bankspeak, it’s called a ‘revolving line of credit’. This just means it’s a card with a set amount of funds (we call that a ‘credit limit’) that you borrow from a bank and can use anytime.

When you use your card to make a purchase, you then need to pay it back. You’ll be charged interest on the amounts you don’t pay back each month, there’s a minimum monthly repayment to avoid a late fee, and some cards will have an annual fee.

Before you apply for a credit card, make sure you’re comfortable making your repayments.

Which type of card should I get?

Most credit cards have one main perk – usually a low rate, low fees or a rewards program. It pays to do your research and find out which one will suit your lifestyle.

How do the repayments work?

We’ll send you a statement each month showing the amount you borrowed, and any fees or charges accrued that month. It’ll also show you your minimum payment amount and due date.

From here, you have a few options.

You can pay your entire closing balance, which will mean you avoid any purchase interest and payment fees, and you’ll keep any interest free periods.

You can pay your minimum payment amount, which will mean you won’t be charged a late payment fee.

Or, you can pay something in-between. Remember, if you pay anything less than your closing balance, purchase interest will be charged on the remaining balance and you’ll lose any interest free periods.

Are there any fees?

You’ll find the full list of fees you might be charged in the T&Cs, but here’s some of the more common ones.

Annual fee

Most cards will have an annual fee. As a general rule, the more features a card has – like rewards programs, complimentary insurance or fee waivers – the higher the annual fee will be.

Late payment fee

If you don’t make your minimum monthly repayment on time, you’ll be charged a late fee.

Cash advance fee

If you withdraw cash from your credit card at an ATM or a branch, or if you use your credit card to buy cash equivalent items like travellers cheques, it’s called a cash advance. You’ll be charged interest (cash advance rate) and a fee (cash advance fee) when you make one.

How do I apply for a credit card?

You can apply for one of our credit cards online, in a branch or over the phone. We’ll ask you for info about your income, expenses, debts and assets, so make sure you have that handy.

What’s a balance transfer?

This is when you transfer the money you owe on an existing credit card to new credit card with a different provider - usually to get a special, lower interest rate or intro offer.

Browse our range of credit cards

...and find one to suit you.

Need help choosing or managing your credit card?

Speak with someone from the team today.

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.