Different Types of Credit Cards in Australia

Understanding the types of credit cards available can give you a head start when narrowing down your choices. While many credit cards reward cardholders for everyday spending, some are designed to help beginners build credit. Others can save you interest on existing debt — if you know how to make their features work for you.

Most credit cards are considered rewards, low-interest or credit-building cards, but a card could feature in more than one of these categories.

1. Rewards

Rewards credit cards have a structured program to give you something back for using your card. Each program has its own rules, but generally, whenever you pay for eligible purchases with your card, you’ll earn points or miles that you can redeem in future.

General rewards credit cards tend to give you more flexibility on how to use your points. Depending on the provider, you could redeem them for gift cards, online merchandise, travel, donations or even as a credit statement against your outstanding balance.

Many programs target specific types of spending or rewards:

Travel rewards credit cards typically allow you to earn points or miles for everyday spending and then use them for flights, upgrades, and hotel accommodations offered by the program provider. You may get additional perks like airport lounge access and travel credits.
Frequent flyer credit cards are similar to travel rewards cards but are linked to a particular airline loyalty program. The points you earn are only redeemable for flights, travel and other rewards from that program.
Premium rewards credit cards aim to encourage increased spending through a better earn rate. Typically, these cards award more points per dollar spent than standard credit cards so you’ll accumulate points faster. They offer a larger generous bonus when you take out a new card, too. Premium cards are characterised by bigger credit limits and expensive annual fees.
Store credit cards earn points at specific stores owned by the brand or retailer providing the card. These cards often feature the retailer’s branding or logo but are issued by a partnering banking or financial institution. Some providers allow you to earn points for purchases made elsewhere, while others have additional benefits, like VIP offers, shopping discounts and free delivery.
Cash back credit cards usually reward you based on your monthly spending — for example, 5% cash back per $1 spent. You can get rewards in other forms, too, such as credit on your account or gift vouchers. Some providers offer one-time cashback promotions on sign-up, where new customers can get more cash back by spending a minimum amount within a specified period.

Rewards credit cards tend to be more expensive regarding interest rates and annual fees because, in addition to the rewards program, you’ll often receive an interest-free period and extras like complimentary travel insurance and an extended warranty. They’re probably better suited to people who can avoid interest by repaying their balance in full each month. You’ll need to have good credit to apply for them.

It’s essential to check the rewards program’s rules — like whether points expire and if there are redemption costs — to evaluate whether the benefits you could get outweigh their costs. You should also confirm that extras like travel insurance are adequate for your needs.

2. Low-interest and balance transfer cards

These types of credit cards are usually cheap and straightforward to use, with fewer features, no rewards but also fewer fees.

Low-interest credit cards typically carry a low-interest rate on purchases and have interest-free days. Many have an annual fee and restrictions on cash withdrawals. They may suit people who can’t always repay their entire balance.
No-interest, flat-fee credit cards are relatively new in Australia. They charge a monthly fee based on your approved credit limit. Some providers waive or reverse this fee if you didn’t use the card during the month. You’ll have to make a minimum monthly payment on the outstanding balance. These cards are designed for purchases, so you won’t be able to withdraw cash or transfer balances.
Balance transfer credit cards offer a low or 0% interest rate for an introductory period, often up to 36 months, when you move a balance from an existing card to a new credit card account. When the introductory period ends, the interest rate reverts to a different interest rate — usually the variable cash advance rate — which can be much higher than the purchase rate. Most providers charge annual and balance transfer fees for these cards, though some may offer promotions and waive them for a limited period.

» MORE: How to calculate credit card interest

3. Credit-building cards

People new to credit cards may find it easier to start with a basic option to keep costs low while developing a repayment routine and building credit.

Along with the low-interest and no-interest, flat-fee cards discussed in the previous section, here are other types of credit cards potentially suitable for beginners or those with bad credit:

Student credit cards are aimed at those studying at university or TAFE. This group may lack the credit and consistent employment history required for a standard credit card. These entry-level cards tend to have no rewards, low-interest rates, smaller credit limits and sometimes no annual fee or an annual fee waived in the first year.
Zero- or low-fee credit cards may have no or low annual fees for the life of the card or the first year only. Interest rates for purchases are often higher on these cards, and there may be ongoing conditions you’ll have to meet, like spending a minimum amount on the card each year, to qualify for a zero annual fee.

Getting your first credit card? Whether you’re a beginner or a credit card pro, make sure you know how to handle a credit card responsibly. It’ll save you time, money and frustration.

How to choose the best type of credit card for you

When choosing a credit card, there are two things to consider: your spending habits and your ability to repay.

For example, if you don’t often travel, you may find it difficult to make the most of the benefits available on a travel rewards card to justify its annual fee. While a store credit card might give you discounts at your favourite shop, you can wipe out these savings if you don’t pay off your balance on time and incur interest.

Generally, a low-rate card with a low annual fee will offer better value for those unable to pay off their full balance every month. A card with a longer interest-free period could suit people who can always repay on time.

Once you have decided on the type of credit card that best suits your needs, you can compare individual card features and costs, such as those listed below, to find the right card for you:

Promotional or introductory interest rate.
Purchase rate after the introductory period ends.
The number of interest-free days.
Annual or monthly fees.
Rewards program fees.
Other standard credit card fees may include late payment, cash advance, over-limit and foreign currency transactions.

About the Author

Kristie Kwok

Kristie Kwok is a personal finance expert at NerdWallet. She has covered personal and business finance for almost 10 years. She is a qualified chartered accountant and has previous work experience in consumer banking, investment banking and taxation. She also has a Bachelor of Commerce degree, specialising in accounting and finance. Kristie became a writer to combine her passion for words with her in-depth industry knowledge. She is based in Melbourne, Australia.

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