Types Of Credit Cards In Australia

In general, there are three main types of credit cards: rewards, low-interest and credit-building cards. But a card could feature in more than one of these categories. Understanding the different types of credit cards available can give you a head start when narrowing down your choices.

Rewards credit cards

Rewards credit cards give you something for using the card, such as points or cashback. Each program has its rules, but generally, you’ll earn points, miles or cashback when you make eligible purchases.

General rewards credit cards give you flexibility on how you can use your points. Depending on the provider, you can redeem them for gift cards, online merchandise, travel, donations, or even cash to pay off an outstanding balance.

Many programs target specific types of spending or rewards, such as:

Travel rewards credit cards typically allow you to earn points or miles on everyday spending. You then use the miles for flights, upgrades, and hotel bookings made through 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 link to a particular airline loyalty program, such as Qantas Frequent Flyer. The points you earn are only redeemable for flights, travel and other rewards offered through that particular program.
Premium rewards credit cards 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 also offer a generous bonus when you take out a new card. Premium cards, like black and metal cards, are typically characterised by bigger credit limits and higher annual fees.
Store credit cards earn points at specific merchants. These cards often feature the retailer’s branding or logo but are issued by a partnering bank or financial institution. Some providers allow you to earn points on purchases made at other retailers. Others have additional benefits, like VIP offers, shopping discounts and free delivery.
Cashback credit cards usually reward you based on your monthly spending — for example, 5% cash back per $1 spent on groceries. You can also get rewards in other forms, such as credit on your account or gift vouchers. Some providers offer one-time cashback promotions for new customers, who can get more cashback by spending a minimum amount within a specified period.
Charge cards have no pre-set credit limits. Instead, purchase approval is typically based on your credit and account history. With essentially no spending ceiling, you can earn more reward points. However, charge cards must be paid off monthly, or the balance is subject to very high interest rates.

Rewards credit cards tend to have higher interest rates and annual fees because, in addition to the rewards program, you’ll often receive extras like complimentary travel insurance. As such, they’re probably better suited to people with good credit who can repay the balance in full each month.

🤓 Nerdy tip

Make sure you check the rewards program’s rules when you apply for a credit card — like whether points expire and if there are redemption costs — so you can accurately determine the card’s value. You should also confirm that extras like travel insurance are adequate for your needs.

Low-interest and balance transfer credit cards

These credit cards are usually cheap and straightforward, with fewer features and little to no rewards.

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 typically 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 don’t use the card during the month. You have to make a minimum monthly payment on the outstanding balance. These cards are designed for purchases only, so you can’t withdraw cash or transfer balances.
Balance transfer credit cards offer a low or 0% interest rate for an introductory period to new customers who move a balance from an existing card. When the introductory period ends, the interest rate reverts to the standard interest rate — usually the variable cash advance rate — which can be much higher than the purchase rate. Most providers charge annual fees and balance transfer fees for these cards, though some may offer promotions that waive them for a limited period.

» MORE: Credit card fees to know (and avoid)

Credit-building credit cards

People new to credit cards may find it easier to start with a basic option while they develop a repayment routine and build credit.

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

Student credit cards are aimed at those studying at university or TAFE. Young consumers still in school 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 no annual fee or the annual fee waived in the first year.
Zero- or low-fee credit cards may have low or no annual fees for the life of the card or the first year only. Interest rates for purchases are often higher on these cards. Plus, there may be ongoing conditions you have to meet to qualify for a zero annual fee, such as spending minimums.

How to choose the best type of credit card for you

When choosing a credit card, consider your spending habits and your ability to repay the balance.

For example, if you don’t travel often, you may find it difficult to make the most of the benefits available on a travel rewards card to justify its annual fee. Similarly, a store credit card might give you discounts at your favourite shop, but 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 may suit people who always pay their balance on time.

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

Promotional or introductory interest rate
Purchase rate after the introductory period ends
The number of interest-free days
Credit card fees, such as annual fees or rewards program fees
Other standard fees, such as late payment, cash advance, over-limit and foreign currency transactions.

About the Authors

Kristie Kwok

Kristie Kwok is a personal finance expert and former contributing writer at NerdWallet Australia. She has covered personal and business finance for almost 10 years. She is a qualified chartered…

Georgia Rose

Georgia Rose is a lead writer on the international team at NerdWallet. Her work has been featured in The Washington Post, The New York Times, The Independent and The Associated…