Credit cards

Key points

  • Credit is money borrowed for use and there are different types of credit.
  • The amount of credit made available by a lender can depend on the borrower's income, debts and capacity to pay.
  • Responsible spending and saving can avoid impulse spending.
  • Credit cards vary with different terms, rates and fees.
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Using a credit card


Credit is a sum of money made available by financial lenders for you to borrow. There are different types of credit, including credit cards, mortgages and lines of credit.

Credit can help when making large purchases or if there is an emergency.

Debt, repayments and capacity to pay

Because credit is a sum of money made available for you to borrow and use it does need to be repaid regularly.

Repayment is an important part of the credit process. There are penalties in the form of interest charges if you do not pay the full amount by each due date. Credit cards offer different repayment periods and interest rates.

Your credit limit, or the amount a lender will make available for you to borrow, depends on your capacity to pay. There are different formulas used to determine borrowing capacity but some of common criteria includes:

  • income
  • employment status
  • other loans or credit limits
  • assets
  • other expenses.

Responsible spending and saving

Credit cards provide a constant line of credit and may encourage impulse buying behaviour. This can increase the level of debt and the amount to be repaid.

Good savings habits can help ensure money is available to repay debt on time.

Consumer choices

Credit cards vary from lender to lender and offer different interest-free periods, penalty interest rates and annual card fees. ASIC's Moneysmart website has a useful credit card calculator.


More information


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Doing it by the book

As a parent it's only natural to want to help your child, but when it comes to homework and study, the completed work should be theirs.

Here are some important points to remember to ensure your child is following good practice for a lifetime of learning.