Credit cards are often seen as something to avoid when trying to set yourself up for financial health. But when approached with strategic thinking and smart use, they can actually support your finances and spending needs.
We spoke to financial wellbeing consultant and co-founder of The Money Collective, Darlene Neu, about credit card green flags – what to look for when choosing your first credit card.
How do credit cards work?
Credit cards allow you to borrow money from your bank or a card provider, and are meant for short-term use. “A credit card should feel like a temporary safety net, not extra income or a long-term solution,” explains Neu.
You’re given a credit limit (the maximum amount you can borrow), based on factors such as your income and credit score. You can repay what you spend in full each month, or carry a balance and make instalments or minimum repayments, with interest charged on the remaining amount.
Green flags to look for in your first credit card
1. Interest-free credit cards
Interest-free credit cards can be a great place to start, because you often have a lower credit limit, and a simple, predictable monthly fee. For example, the CommBank Interest-Free Low-Fee credit card has a monthly fee of just $10, with no interest or late payment fees.
2. Credit limits you can change
A good first credit card is one where you can start with a lower credit limit, but have the option to increase if or when you need to. Starting with a lower credit limit can be a safe space; it can prevent you from spending beyond your means. So, if you’re a little nervous, look for one where there are options to increase the limit down the track.
3. Easy to understand repayments
You’ve found a great credit card option if it helps you make your repayments on time. That might look like clear messaging around your minimum repayments each month, reminders that your repayment is due, or automated options where you can set up a Direct Debit or other regular payment system so you never miss a date.
4. Great security features
You want your first credit card to make you feel more financially secure, not less! For this reason, look for one with strong security features, like biometric login, fraud monitoring, card lock and easy-to-understand dispute or chargeback processes. These will give you peace of mind, which is especially beneficial when you’re just starting out.
5. Transparent fees and conditions
A strong green flag is knowing exactly what you’re signing up for. Look for a credit card with clear fees, conditions and terms. That should span across monthly fees, foreign transaction charges and any other regular costs.
Cards that clearly explain costs upfront can help you make informed decisions and avoid unexpected charges, which is especially important when you’re new to credit.
Credit card red flags to take note of
We’ve talked about the green flags, but there are also things to watch out for. “Remember, you’re spending future earnings,” says Neu, who recommends using credit cards as an optional tool for expenses or emergencies.
Overspending can quickly inflate your debt and lead to higher interest and repayments. Missing repayments (even minimum ones) can lead to fees or even damage your credit score over time. The key is staying within your limits and paying on time, every time.
Ultimately, credit cards are about management. Choose wisely, use them intentionally, and they can offer flexibility and benefits without compromising your financial wellbeing.