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5 questions to ask before applying for a Credit Card

applying for a credit card imageCredit cards can be both a blessing and a curse. On the one hand, they can be a real lifesaver, especially if you’re at university and tight on cash. On the other hand, if you use them carelessly, you might rack up an enormous amount of debt that will be very hard to get on top of in the future.

If you lack the self-restraint to resist paying for those new shoes that you love but don’t need on plastic, or you’re prone to accumulating a little bit of debt, getting a credit card might not be for you. But if you think you can refrain from overspending, ask yourself these questions first before you take the plunge.

1. Why do I need a credit card?

Firstly, what’s your reason for getting a credit card? Are you going to use it for everyday expenses or for buying things online, or are you planning a  bigger purchase? Or maybe you just want one for emergencies. Whatever your reason is, make sure you think about it carefully before you start your application. The more tailored your reason is, the tighter the restrictions you’ll be able to place on your credit card and the less likely you’ll be to overspend. (Spoiler alert – funding an entire overseas trip using credit isn’t a great idea.)

2. Will I be able to pay back the money I spend?

Having a credit card allows you to temporarily access money that you don’t yet have. And while this might be helpful in an emergency, it can also make it quite tempting to spend money that you won’t be able to pay back.

Booking a spontaneous trip to Europe with your credit card simply because you’re getting major FOMO as you scroll through Instagram is a prime example of spending money that you might not be able to pay back. According to Finder research, 28% of Aussies have missed a repayment on a credit card. That’s a large chunk of us leaving ourselves open to copping a nasty late payment fee.

Kate Browne,


The best way to approach your credit card is to treat it like it’s your own money, and if you do have to spend a little more, make sure to pay it back as soon as you can. Credit cards are not free money, so make sure you’re getting one to suit your needs. Opt for a low limit card so you’re not tempted to go overboard. If you’re not sure if you can actually afford it, use an online calculator to determine how long it will take you to repay your credit card balance and go from there.

3. What exactly will I be using it for?

Before you apply for a credit card, have a think about what you’ll mainly be using it for. If it’s for a big ticket item like furniture, or really anything that might mean you have to roll your balance over for a few months, it's a good idea to look for a card with lower interest rates. The downside of these cards is that they often come with an annual fee. On the other hand, if your credit card is mainly going to be used for emergencies only, there’s no point in paying an annual fee for the lower rates.

4. Is the rate right for me?

If you don’t pay your balance in full each month, your purchases will start to accrue interest. If this sounds like something you might do, you might want to look for a low interest or “no-frills” credit card. Credit cards that offer rewards, perks and benefits might sound like a good idea, but most of the time they have higher rates and fees. If you’re a first-time credit card holder it’s always a good idea to go for a card with lower rates. That way, if you find you can’t pay it back as quickly as you thought, you won’t have to pay too much in interest.

5. What fees are involved?

It’s also important to understand exactly how the card will work and what fees might be expected of you. The most common fee you’re likely to face is an annual fee. These annual fees can amount to over $1,000, but if you’re a first-timer, you’ll want to look for one that’s a little more budget friendly. As a rule, the more features and rewards a credit card comes with, the higher the annual fee will be. Some lenders might waive these fees for the first year, so it’s important to make sure you’re across what the ongoing cost might be in the future before you sign on the dotted line. Other fees might include late payment fees, over-limit fees or reward program fees.

If you are still thinking of getting a credit card, make sure you weigh up your options before you apply. Choosing the wrong credit card for both your needs and your habits could leave you with a whole lot of unnecessary debt.

Kate Browne is a personal finance expert at

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