A credit card allows you to borrow money to make your purchases. Credit cards can be used to pay for goods and services at home and overseas or when shopping online.

The benefits

No interest is payable (except on cash advances) when a credit card balance is paid in full monthly. This makes credit cards a useful way to borrow over short periods (30 days or so).

Credit cards can be useful in emergencies, allowing ‘instant access’ to a borrowing facility (by cash advance) up to a pre-agreed credit limit.

Credit cards may also allow you to earn reward points based on how much you spend on your card.

Things to keep in mind

Credit card purchases overseas can be subject to currency conversion before the transaction appears on your statement, although some overseas merchants allow payment in the currency the card was issued in so you know exactly how much you will need to pay to your bank later.

You should be mindful of the 'approximate' exchange rate when making purchases overseas or via overseas websites to keep within your card’s limit.

If you don’t pay the full amount each month you will be charged interest on top of the amount you borrowed. A cash advance incurs interest from the date of the withdrawal.

Some smaller retailers may not accept payment by credit card.

Security

If a credit card is lost, stolen, or compromised you can contact your card issuer to stop all further transactions on the card. Refunds for fraudulent transactions can also be obtained (refer to the issuer’s specific credit card terms and conditions for details).

When paying in person you will usually be asked to enter your Personal Identification Number (PIN) or sign to authorise the payment.

Banks monitor customer credit card spending trends and transactions. If there are transactions on your card that appear 'unusual' your card issuer may contact you to check your usage to protect you (and them).

A credit card is safer than carrying large amounts of cash.