Credit card info for dummies, beginners and first-time credit card owners

Information verified correct on September 29th, 2016

What everyone must know about their credit card

First time credit card owners looking for a guide to help them become a credit card expert should look no further. This page will explain how a credit card works, how they can a valuable source of funds and why they can be an expensive way to access credit.

Credit card info for dummies

The world is turning digital and we need a way to get the things we want while also having some spare cash incase of emergencies. A credit card offers a short term cashflow solution and a convenient way to make payments.

Credit card inconvenience

Credit cards can be used at the shops, on the internet and at the ATM. Credit cards work well if you don’t overspend. The things you buy will cost you more if left unpaid. Also beware of credit card ATM withdrawals, they are one of the most expensive ways to get cash. Avoid cash advances if you can.

How do credit cards work?

This is what you should know about how a credit card works:

Using a credit card

  • Shopping online. At the checkout page, enter your 16 digit account number printed on the front of the credit card, the expiry date and the CCV code. Verified By Visa and MasterCard SecureCode may then require whoever uses your credit card to enter a password before the transaction is processed.
  • Shopping in-store. Press CREDIT on the point of sale terminal. Enter your PIN. You can also tap your credit card to make a contactless purchase under $100 at most major retailers.
  • ATM withdrawals. You can also use your credit card to get cash from an ATM. Daily limits usually apply. A cash advance accrues interest at the cash advance rate, a cash advance fee is charged and interest-free days do not apply to cash advance transactions.

Credit card features

  • Credit limit. A purchase or cash advance amount is deducted from your available credit. This is the limit you were assigned by the credit card provider.
  • Statements. A credit card statement is issued about a month after you activate your new account. You can review your account activity, charges and minimum repayment information. Pay the minimum repayment by the due date to keep your account in good standing.
  • Interest. The annual percentage rates of interest are shown on your credit card statement. Interest is calculated yearly based on your balance at the end of the statement period and paid monthly until you clear your balance.
  • Interest free. Some credit cards have promotions for new applicants. Balance transfers and interest-free purchases are two common offers. These features can save you money in interest repayments.
    You can also save money on interest by taking advantage of interest-free days on purchases. Most credit cards offer up to 55 days interest-free. You can make interest-free purchases from month to month as long as you pay your balance in full by the statement due date.

Types of credit cards

There are many different types of credit cards for different types of borrowers:

Visa, MasterCard and American Express

Visa, MasterCard and American Express are the card processors. The bank or financial institution you applied with are the card provider and the ones you pay your bill too. Card processors, on the other hand, provide the digital highway for credit card transactions to take place. Visa and MasterCard branded cards are accepted in about an equal number of places. American Express is also accepted worldwide, though not as widely as Visa and MasterCard.

Back to top

What are the pros and cons of using a credit card?


  • Convenience. Credit cards are widely accepted and offer short term access to credit.
  • Bonuses. Some credit cards have extras like complimentary insurance and airport lounge passes.
  • Interest-free. Most credit cards offer up to 55 days interest-free. This is an incentive from the card provider so you pay back everything you’ve spent at the end of the month. Some credit cards even have extended interest-free promotions for new customers.


    • Temptation. The temptation to overspend. You can place daily limits on credit card purchases and cash advances if this is a concern.
    • Fees. You may need to pay an annual fee to own a credit card. There are also cash advance fees, late payment fees, international transaction fees and more.
    • Interest on interest. Interest is charged on interest if you have unpaid purchases and cash advances from previous months. Debt can accumulate quickly when interest compounds.
    • Annual fees. Many cards charge annual fees, though how much you’ll be expected to pay will vary from card to card.
    • Rewards. Rewards cards are only rewarding when you get back more than what you pay in card fees.
A credit card can be a great short term cashflow solution — if it’s used correctly. Pay your balance in full and avoid cash advances to get the greatest benefit from a credit card. There are many different types of credit cards on the market. Compare your options before you apply for a credit card so you can find the best card for you.

Back to top

Frequently Asked Questions

How do I know what my credit limit will be?

Credit card providers have their own systems for assigning credit card credit limits. You can request a credit limit when you apply for a credit card. The card provider will approve this request or set a new credit limit. Your credit limit is set by calculating your income and assets against your debts and expenses.

How do I increase or decrease my credit limit?

You can request a credit limit increase online, over the phone or in writing. If your circumstances have not changed since you opened the account, and your debt has increased, a limit increase may be a long shot. You can request a credit limit decrease by contacting your bank and asking for a reduction in your available credit. Minimum and maximum credit limits do apply for each different product.

When do I get interest free days?

Interest free days is a credit card feature that offers an interest free period on purchases if you don’t carry a balance from the previous month. See our guide to understand how interest-free credit cards work.

How do I cancel a credit card?

You can cancel a credit card at any time if the account does not have a balance. There are no minimum lock in terms. The credit provider can usually do this over the phone.

Back to top
Was this content helpful to you? No  Yes

Related Posts

Ask a Question

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the privacy policy, receive follow up emails related to and to create a user account where further replies to your questions will be sent.

20 Responses to Credit card info for dummies, beginners and first-time credit card owners

  1. Default Gravatar
    JJ | September 9, 2016

    Alright… Really stupid here, don’t know anything about credit cards. And when I’m applying for them it askes for my card limit. I’m trying to find articles that explain it for a first-time user. Help?

    • Staff
      Ysa | September 16, 2016

      Hi JJ,

      Thanks for reaching out.
      You may wish to check this credit limit guide for a better understanding on how to choose a responsible credit limit for a credit card.

      I hope this helps.


  2. Default Gravatar
    Sam | July 7, 2016

    Hi I need a credit card to hire a car in Spain what card would you recommend as I would only need to use it 2-3 times a year

    • Staff
      May | July 7, 2016

      Hi Sam,

      Thanks for your inquiry.

      Unfortunately, as is a comparison website and general information service, we’re unable to recommend a specific card to our users as the best option depends entirely on your own financial situation, spending habits and needs.

      Nonetheless, you may like to reconsider this page in comparing your options for credit cards that can be used overseas (or in Spain). Though I’m not sure if these cards we have listed will be accepted by your merchant (for car hire). It’s best to contact the car hire provider if they would accept these cards.

      I hope this has helped.


  3. Default Gravatar
    Justin | April 11, 2015

    If i bought a $3000 lawn mower what are some examples of what my payments would be

    Random interest rates and min. Payments

    • Staff
      Jonathan | April 14, 2015

      Hi Justin, thanks for your inquiry!

      Depending on whether the card has a promotional rate, you would be paying the purchase rate on the balance remaining. For 0% purchase credit cards please see this page.



  4. Default Gravatar
    Broke | March 13, 2015

    My partner and I are relocating and need to pay car repairs $2700.00, on top of relocating. We are also changing jobs, so getting a loan has been difficult. What kind of credit card should we go for?

    • Staff
      Jonathan | March 16, 2015

      Hi Broke Traveller,

      For repaying purchases such as car repair fees it can be ideal to use a purchase credit card. Please see this page for a list of cards that have purchase rate promotions.

      I hope this has helped!



  5. Default Gravatar
    Emily | March 11, 2015


    Would you recommend a 1st time Credit Card user to get one for an overseas trip for purchases? Most likely only needing under $1000?

    Also, when purchasing items on a credit card, are you always paying more for the product because of the rates?

    Going overseas soon and don’t want to get a loan!

    • Staff
      Jonathan | March 11, 2015

      Hi Emily, thanks for your inquiry!

      Purchase credit cards can be a great way to make purchases overseas. Certain credit cards have 0% for currency conversion fees and international transaction fees. For more information please see this page for 0% purchase credit cards.



  6. Default Gravatar
    | October 9, 2014

    I would like to know whether the merchant gets the amount instantly the time the credit card is swiped, while buying some merchandise/service or the amount is sent after we make the payment to the bank on the due date and the merchant gets his amount, after maybe adjusting some charges.

    • Staff
      Elizabeth | October 9, 2014

      Hi C K Shah,

      As long as the payment is successfully processed on your card, ie. the bank allows the payment to go through because the charge hasn’t meant you’ve gone over your credit limit or for any other reason, then the merchant will be paid as soon as this amount is approved by your bank. It is not based on when your due date is as you made the purchase on credit.

      As mentioned, this process may take a couple of days, but if your credit card is declined the payment will not be able to go through, and if the payment goes through the merchant will be paid and it will be your responsibility to repay the bank.



  7. Default Gravatar
    C | October 8, 2014

    After we buy a merchandise and swipe the credit card, I would like to know, when is the money usually transferred by the bank to the merchant. Thanks.

    • Staff
      Elizabeth | October 9, 2014

      Hi C K Shah,

      Thanks for your question.

      This depends on the type of card used in the transaction and what type of sale it was i.e. whether it was online or in a bricks and mortar store. The time period to receive the funds can range from anywhere between one business day to seven business days, or longer in some cases.

      Hope this has helped.



  8. Default Gravatar
    Amy | January 17, 2014

    Can I transfer some money to clear overdraft on current account

    • Staff
      Jacob | January 17, 2014

      Hi, Amy.

      Thanks for your question.

      If you would like to transfer an overdraft account to a credit card under a balance transfer promotion, you may want to consider getting in touch with Citibank. It’s a good idea to give them a call first. They can check your account over the phone to see whether they will allow the account to be transferred under the promotional rate of interest top one of their credit cards.

      I hope this helps.

  9. Default Gravatar
    Madeline | November 8, 2013

    Can I transfer money from a savings account to the credit card?
    And will this increase the credit card balance?

    Eg. If I purchase something with a credit card for $30, then later transfer $30 from my savings account to my credit card, will my balance on the credit card be back up? Or does that just pay off fee’s?

    • Staff
      Jacob | November 8, 2013

      Hi Madeline.

      Thanks for your question.

      When you transfer money from your savings account to your credit card, you will increase the card’s overall balance and decrease the card’s outstanding balance. You get a statement once a month which shows your total purchases and the total amount of interest charged for that period.

      I hope this helps.

  10. Default Gravatar
    Krystal | July 4, 2013

    Can you please explain the difference between a current balance and a closing balance.
    Thank you

    • Staff
      Jacob | July 4, 2013

      Hi Krystal. Thanks for your question. Your current balance is how much money you have on your card. If you have a credit limit of $500 and you make a purchase of $100, the current balance is your $400 available credit limit. The closing balance is your card balance at the end of the monthly statement period. I hope this helps. Jacob.

Credit Cards Comparison

Rates last updated September 29th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Enjoy a 0% p.a. balance transfer offer for 18 months and also earn 2 bonus Velocity Points in the first 3 months on everyday spend.
20.74% p.a. 0% p.a. for 18 months $64 p.a. annual fee for the first year ($129 p.a. thereafter) Go to site More info
ME Bank frank Credit Card
Enjoy a low and consistent interest rate on purchases and cash advances, combined with no annual fee.
11.99% p.a. $0 p.a. Go to site More info
HSBC Platinum Credit Card
Receive a full annual fee refund and save $149 if you meet the $6,000 spend requirement. Enjoy a balance transfer offer and platinum card benefits such as complimentary insurances and concierge services.
19.99% p.a. 0% p.a. for 15 months $149 p.a. Go to site More info

* The credit card offers compared on this page are chosen from a range of credit cards has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

Ask a question