Credit Cards — Fact Sheet
Source document
This fact sheet is reproduced for general information purposes only.
It is an industry-standard explanatory document and has not been authored by Model Mortgages.
It does not provide personal advice.
Credit cards
Credit cards can be a convenient way to manage finances, but they can also be expensive and carry risks.
If you are deciding whether a credit card is right for you, there are several factors to consider.
What’s good about a credit card
Security
If your wallet is lost or stolen, a credit card can be cancelled quickly. Most financial institutions also have security processes in place to protect you from unauthorised or fraudulent transactions.
Building your credit score
Your credit card repayment history forms part of your credit file. Keeping the account in good standing may help build a positive credit history, which can improve your chances of approval for other lending products.
Interest-free days
If you pay your balance in full before the statement period ends, you may receive interest-free days on future purchases for a set period.
Rewards and points
Rewards and frequent flyer credit cards allow you to earn points on eligible purchases such as groceries and fuel.
Points may be redeemed through rewards programs for benefits such as flights, products, cashback, or upgrades, depending on the card.
Emergency funds
Credit cards can act as a short-term safety net if you do not have enough cash or savings to cover unexpected expenses. Any amount used must still be repaid.
Travel benefits
Many lenders offer complimentary travel insurance with premium credit cards, which can be appealing for frequent travellers.
Complimentary extras
Some cards include features such as purchase protection, extended warranty insurance, airline lounge access, dining offers, or other promotional benefits.
Consolidating existing debts
Balance transfer credit cards may allow you to move existing high-interest debt to a new card with a low or 0% promotional interest rate for a limited time, potentially reducing interest costs.
Emergency replacement cards
If your credit card is lost or stolen while travelling overseas, card schemes such as Visa and Mastercard may provide an emergency replacement card within 24–48 hours. Fees may apply.
Things to consider
Interest charges
If you do not pay the full closing balance by the due date, interest-free periods usually no longer apply. Interest is then charged on outstanding balances.
Credit card interest rates are typically higher than most other forms of credit.
Cash advances
Cash advances generally attract interest from the date the advance is made until it is repaid.
Balance transfers
Some lenders offer 0% balance transfer rates for a promotional period. Once the promotional period ends, any remaining balance usually reverts to a higher interest rate.
If the balance is not repaid within the offer period, interest may apply to the remaining amount.
Credit card fees
Credit cards may attract a range of fees, including:
- annual fees
- late payment fees
- international transaction fees
- cash advance fees
- balance transfer fees
Some cards have no annual fee, while rewards cards typically attract higher annual fees.
Credit score impact
Missing credit card payments can be recorded on your credit report and may negatively affect your credit score.
A payment is generally considered missed if it is made more than 14 days after the due date.
Disclaimer
The information provided in this fact sheet is not legal, taxation, or financial planning advice.
It has been prepared without considering your objectives, financial situation, or needs.
All loan products are subject to lender criteria and approval. Fees, terms, and conditions apply.
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