Credit Cards: The Top 18 Benefits and Disadvantages*

Information verified correct on September 28th, 2016
credit cards

Get the rundown on 18 of the biggest reasons why you should and shouldn’t get a credit card.

Credit cards enjoy a mixed reputation. Savvy spenders and investors relish the perks and interest-free days a credit card offers, while those in debt will cringe every time they think of their credit card spending and how long it’ll take them to pay it off.

If you’re deciding whether or not a credit card could benefit you, the following list will spell out the advantages and disadvantages of having one in your wallet. Let’s start with the benefits of a credit card.

Benefits

It’s safer than cash

If you only use cash you must carry it around all the time, so if you lose it you’re out of luck. Lose a credit card and you will be out very little if anything, because your card is protected and can be cancelled with a simple phone call.

They help you establish credit

Everyone needs a good credit file to buy a house or a car or even to get a mobile phone. When the new positive credit reporting laws come into effect in March 2014 this will start to mean your credit file will depend on things like the status of your credit card accounts and how you’ve paid them off.

You can profit from them

By taking advantage of valuable rewards programs you can earn points for airline tickets, petrol, shopping and a host of other things. There aren’t any rewards programs for using cash which are as simple as rewards programs for credit cards.

Credit card companies may have your back when it comes to returning items

If you need to return something that was defective your credit card company might retract the payment if the store or manufacturer refuses to do so.

You can use them anywhere in the globe

When you travel with a credit card you never have to worry about switching your currency, although this might come with a currency conversion and cash advance fee.

Credit cards make online shopping a whole lot easier

Yes, you can use PayPal with some online stores, but the majority accept standard credit cards.

In an emergency, you will be glad you have one

Even if you have piles of cash sitting in the bank or tucked under your mattress, if it’s not in your pocket in an emergency you might as well have nothing. A credit card can help you out of a tight spot and can be in your wallet all of the time.

You need them to make reservations and pay deposits

Flights, accommodations, and cars all require you to make a reservation and pay a hefty deposit and none can be done with cash.

When you buy big ticket items or electronics you might get an extended warranty

Some credit cards offer an extended warranty past that of the manufacturer when you use your card to purchase these items. They may also protect you against theft or damage done to the item, or refund the difference if you find the same item cheaper elsewhere.

Tracking your expenses is easy

Spend all you want and at the end of the month you’ll get a statement with it all neatly broken down for you.

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Disadvantages

There’s the possibility of spending more than you have. A credit card gives you the opportunity to spend more than you’re making, getting you into debt which is hard to shift.

They have high interest rates

Credit cards have some of the highest interest rates of all personal finance products including home loans and personal loans.

They can harm your credit file

Credit cards might be a good way to build a positive credit card history (although the effects of this won’t apply until March 2014 and beyond), but they can also leave negative marks on your credit file. This can happen if you make late repayments, are unable to pay off your credit card, or apply for too many in one period of time.

Credit card fraud

Fraud may not just be limited to credit cards, but it’s a major area criminals hit when they set out to make an illegal buck. You shouldn’t worry too much about this as most credit card issuers will compensate you for unauthorised transactions and have security teams monitoring accounts at all times.

Cash advances are expensive and can apply for many transactions

Interest-free days and promotions are promoted everywhere but they don’t apply to cash advances. Generally you will be paying interest on a cash advance from day one. Cash advance rates also usually apply to less frequent credit card uses such as getting cash out at an ATM, gambling and buying foreign cash.

Unexpected card fees can mount up

What you may not be aware of is that ancillary fees can sneak up on you often without you even being aware it’s happening. Fees can be charged for late payment, exceeding your credit limit, having a payment refused, having an extra card on the account, replacing a card or using your card overseas for purchases and for ATM withdrawals.

Loyalty cards can be expensive

Store cards like Myer and David Jones can charge high interest rates, and like other credit cards should be paid in full each month if possible. The benefits you can receive from them is that you get discounts, special buy opportunities, added warranties and extended credit, but all this is only worthwhile if the cards are religiously paid off each month.

Reward programs are expensive

Rewards credit cards are very popular, but recent Reserve Bank reforms have meant that the annual fees charged by credit card issuers have increased for those with a rewards credit card. Because of this, having a reward system for a cardholder has become less attractive and really should only be kept now if you can ensure that you are going to get the benefits.

The decision is yours

A credit card won’t suit everyone, but may be useful for certain types of spenders. Review the list above and find out if a credit card will be truly useful for you, or a temptation which you don’t need. If you’ve decided a credit card is for you, it’s crucial to learn how to compare these. This differs depending on what card you’re interested in.

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Compare credit cards

Rates last updated September 28th, 2016
Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
Earn bonus Velocity Points in the first 3 months. 0% p.a. for 18 months on balance transfers.
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
American Express Essential Credit Card
Receive a $50 credit on eligible spend and get Smartphone screen insurance combined with a no annual fee for life card. Also enjoy a 0% p.a. balance transfer rate for 12 months.
14.99% p.a. 0% p.a. for 12 months with 1% balance transfer fee $0 p.a. Go to site More info
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 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
St.George Vertigo Platinum
A platinum card with a balance transfer offer of 0% p.a. for 20 months and an introductory purchase offer of 1% p.a. for 12 months with an annual fee waiver for the first year.
1% p.a. for 12 months (reverts to 12.74% p.a.) 0% p.a. for 20 months $99 p.a. Go to site More info
Citi Qantas Signature Credit Card
Earn up to 70,000 bonus Qantas Points on eligible spend, plus enjoy a 0% p.a. for 6 months offer on balance transfers.
20.99% p.a. 0% p.a. for 6 months $99 p.a. annual fee for the first year ($395 p.a. thereafter) Go to site More info
ANZ First Visa Credit Card - Exclusive Offer
Take advantage of this exclusive offer and enjoy 0% p.a. for the first 12 months on balance transfers and 0% p.a. for the first 3 months on purchases.
0% p.a. for 3 months (reverts to 19.74% p.a.) 0% p.a. for 12 months $30 p.a. Go to site More info
Westpac Low Rate Card
A no frills credit card with an introductory rate of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases.
1% p.a. for 12 months (reverts to 13.49% p.a.) 0% p.a. for 18 months $59 p.a. 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
ANZ First Visa Credit Card
Enjoy a low annual fee, interest-free days on purchases and a low minimum credit limit.
19.74% p.a. 0% p.a. for 18 months with 3% balance transfer fee $30 p.a. Go to site More info
ANZ Platinum Credit Card - Exclusive Offer
Receive $200 back when you spend $500 in the first 3 months. Also enjoy a $0 annual fee for the first year.
19.74% p.a. $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
NAB Low Rate Credit Card
The NAB Low Rate Card offers 0% p.a. on purchases and balance transfers for 15 months. This card also comes with a low annual fee.
0% p.a. for 15 months (reverts to 13.99% p.a.) 0% p.a. for 15 months with a one off 2% balance transfer fee $59 p.a. Go to site More info
HSBC Platinum Qantas Credit Card
Receive 60,000 bonus Qantas Points on eligible spend within 3 months. Enjoy access to premium benefits and complimentary insurance.
19.99% p.a. $199 p.a. Go to site More info
Virgin No Annual Fee Credit Card
No annual fee for the life of the card with $100 cashback and a 0% p.a. offer on balance transfers for 18 months. Spend criteria applies for cashback offer.
18.99% p.a. 0% p.a. for 18 months with 2% balance transfer fee $0 p.a. Go to site More info
ANZ Platinum Credit Card
Enjoy platinum card benefits with $0 annual fee in the first year and complimentary overseas travel and medical insurance.
19.74% p.a. 0% p.a. for 18 months with 3% balance transfer fee $0 p.a. annual fee for the first year ($87 p.a. thereafter) Go to site More info
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Credit Cards Comparison

Rates last updated September 28th, 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
St.George Vertigo Visa
Introductory offer of 0% p.a. for 18 months on balance transfers and 1% p.a. for 12 months on purchases, plus a low annual fee.
1% p.a. for 12 months (reverts to 13.24% p.a.) 0% p.a. for 18 months $55 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 CreditCardFinder.com.au 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.

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