Should I get a credit card?

/ credit report personal finance

Getting a credit card in Australia

Credit cards can be a double edged sword, depending who is wielding them. For some, they can be a good introduction into the utility and responsibilities involved in the world of credit. However, for others, they may represent a slippery slope into a world of debt.

If you've been considering applying for a credit card, here are a few points to consider.

Am I ready for a credit card?

There is plenty of debate over when you should get your first credit card, and whether it's wise to even have more than one. If you are uncertain, talk to your bank about the responsibilities involved.

It's also a good idea to do your research when it comes to credit cards - interest rates will vary from one credit provider to the next, and some may have extra rewards attached such as airline alliance points. It is important to do your research before you apply as many credit applications in a short space of time can be seen negatively by prospective lender when they view your credit report.

The Australian Securities and Investments Commission (ASIC) advises awareness of the various fees you'll pay when you take out a credit card, as well as avoiding cash advances which can result in a higher interest rate1.

"A credit card is nothing but a tool," explains Forbes contributor, Luke Landes. "Whether its effects are helpful or harmful depends on the skills and knowledge of the user, a person with the power to choose how to use the tool."2

Making a good credit impression

Like any form of credit, events both positive - such as making your monthly payments on time - and negative can be recorded on your Equifax credit report.

As a record of your credit history, your credit file can be used as a reference by other credit providers, as one part of the information they review, when they are deciding whether to approve your application for a home loan, for example.

Responsible use of a credit card without an outstanding balance or a series of late payments can act as an endorsement for future credit. One good way to do this is to pay off your balance as soon as you can by paying the minimum amount each month.

Still unsure whether a credit card is for you? Evaluate your own spending habits, and any other bill payments you are making such as for your internet or utilities. If you struggle to make these payments on time every month, perhaps you should hold off on getting a credit card until you've got a strategy to manage your existing debt.

You can check your progress by requesting a copy of your Equifax credit report to see what credit providers see when you make an application.

Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Therefore, you should consider whether the information is appropriate to your circumstance before acting on it, and where appropriate, seek professional advice from a finance professional such as an adviser.

1​ASIC, Smart ways to use your credit card. Accessed June 2015.

2Forbes, Credit Card Basics: Everything You Should Know. Accessed June 2015.

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