How do I know if my credit card will work?

A credit card can be an effective tool for making purchases, simplifying your finances and even smoothing out your cash flow. But before applying for one, it’s a good idea to understand how they work.

Types of cards

Broadly, there are four types of credit cards  

Interest-free: This type of credit card may best suit people who are new to credit and want more control over their finances. Interest-free cards generally offer a simple monthly fee based on the card limit, so there's no complex fees and pricing structures. 

Low Fee: These cards tend to be suited to people who want a credit card for the convenience, and are confident they’ll be able to pay back their balance in full each month. They attract a higher interest rate than some other card types.

Low Rate: Low-rate credit cards typically have a lower purchase interest rate than some other cards. These cards are suited to people who expect they’ll carry over a balance from month to month rather than paying it off in full, and would like to minimise the interest they’ll pay on this balance. Low-rate cards have a higher annual fee than some of our other card types.

Awards: These cards allow you to earn awards points as you spend. You can spend these points on travel, gifts or even choose to receive cash back. They have a higher annual fee and interest rate than some of our other card types.

Repayments

Credit cards require you to make repayments each month while there is an amount owing. You can choose to make the minimum payment as shown on your statement, or pay your balance in full. You can also pay off any amount in between. Keep in mind that the more you pay off, the less interest you’ll pay.

Balance transfers and cash advances

A balance transfer allows you to transfer a balance from an existing card (say, with another credit card provider, or a store card) onto a new credit card. With a new card you’ll typically be offered an introductory period with a low initial interest rate, which can help you save interest. When the introductory rate finishes, the outstanding balance (including any related interest) will be treated as a cash advance and charged interest at the cash advance interest rates.

You can also withdraw money from some credit cards. This is known as a cash advance1. Bear in mind that you’ll be charged a fee for cash advances, as well as higher interest on the cash advance amount you withdraw.

Fees

Credit cards have a number of associated fees associated, including annual fees, monthly fees, cash advance fees, late payment fees and international transaction fees. Before applying for any card, make sure you’re across all of the fees that may apply and have budgeted for any fees you may incur.

Credit card benefits

A credit card provides access to funds up to an agreed limit. Provided you pay the minimum repayment amount by the due date each month, you'll always have access to this limit. 

Credit cards can save you carrying cash and can be used to buy online or over the phone. They can be useful if, for example, you have to make a purchase before payday.

Credit card trade-offs

If you don’t repay your balance in full every month, you'll be charged interest in addition to any fees that may apply. Additionally, some cards don't allow for balance transfers or cash advances.

While credit cards can be convenient, remember that you'll have to repay any balance you accrue on your card. 

Who can apply for a credit card?

To apply for a NAB credit card, you must be:

The following Visa categories are not acceptable:

How to apply for a credit card

You can apply for a NAB credit card either online or at a NAB branch. To complete your application, you’ll need to have some of your documents and information ready. You’ll also be asked to set a limit for the amount of credit you want.

Learn more about what you need to have ready to apply.

If your application is approved, it’s then subject to verification. If you meet the verification criteria, you’ll receive your credit card in the mail within five working days. Once you activate it, you can start using it straight away.

How does a credit card work?

Your credit limit

Your credit limit is the amount you can borrow. When you apply for a credit card you can either set your own credit limit or the bank will set the maximum credit amount, based on the information you supplied about your financial situation. The bank will also set a minimum card limit, which depends on the type of card you apply for.

Interest rates

When you apply for a credit card you’ll be told which interest rate applies. This is an annual percentage that you pay, and it applies to any outstanding amount not paid off by the required due date. The amount of interest you’ll pay will differ each month. It’s determined by how much you spend, how much you repay, and when you repay it. For example if the interest rate is 18% per annum, and you have $100 outstanding on your balance, you will be charged 18% per annum of $100, or approximately $1.50 per month.

Interest-free periods

Most credit cards have ‘up-to-44 days’ or ‘up-to-55 days’ interest-free periods on purchases. This means interest on amounts you owe doesn’t start to build up until the statement due date.

Interest-free periods usually start on the first day of your billing cycle, not when you make a purchase. For example, if your credit card has an interest free period of 44 days, this means you have 44 days from the day of your statement to pay the closing balance in full, or if your statement displays an interest free days payment, this amount in full. After this, you will be charged interest.

Note: Interest rates and interest-free periods don’t apply to a NAB StraightUp Card.

Repayments

Once you have a credit card, like any debt, you need to pay it back. Your bank will send you statements each month which will show you the total amount you have borrowed, any payments you have made, the interest rate, any interest or charges that have accrued, as well as the minimum amount you have to pay.

To avoid paying interest, make sure you pay the closing balance in full by the due date each month. If you don’t pay the full amount of the closing balance, you will need to pay at least the minimum payment amount shown on your statement. If this amount isn’t paid by the due date, you may have to pay late fees or missed payment fees, as well as interest.

Balance transfer

A balance transfer is a way to move some or all of what you owe (your balance) on one or more credit cards to a new one. The debt you move to the new card usually has a much lower interest rate (or often no interest) than what you were previously paying, for a period of time. This is known as a promotion period and it’s usually between six months and three years. After this period, any unpaid balance transfers will attract the variable cash advance rate.

Annual fees

Most credit cards have an annual fee, which is payable every 12 months. The annual fee will be charged within the first statement period (generally 30 days) of your card opening and after you’ve made your first purchase. Depending on which card you choose, you may pay a lower annual fee with one credit card when compared to another.

Monthly fees

The NAB StraightUp Card has a monthly credit card fee, rather than an annual fee. The amount of the monthly fee will depend on your credit limit.

Late payment fees

Most credit cards will charge a fee if your payment is late or missed. Learn more about how to avoid late payment fees.

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