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Types of Credit Cards

Reward cards

This kind of card rewards you for using it – for example, you may get travel miles, cashback, or store discounts. It often comes with an annual fee and high interest rates, so it’s important to ensure the benefits outweigh the costs. You may need a good credit score to get approved.

Purchase cards

Need to spread the cost of a big purchase? These cards usually have an interest-free period, which can make them a cheap way to borrow. You’ll need to meet the terms and minimum payments to keep the 0% rate, and it’s best if you can pay off the balance before the interest-free period ends. Typically, you’ll need a good credit score to get this type of card.

Travel credit cards

Going overseas? If you book hotels or withdraw money abroad on your existing credit card, you may be hit with hefty fees. But taking a big wad of cash can be inconvenient and risky. Travel and currency cards can help you reduce the cost of using a card in another country.

Balance transfer cards

Already have a credit card? You may be able to reduce the amount of interest you pay, by moving your existing card debt to a balance transfer card – usually for a small fee. These cards typically offer a 0% or low interest rate for a set period. You may need a high credit score to get one.

What is a Credit Card?

Credit cards let you borrow money from a bank under the agreement that you’ll repay it by your bill’s due date or incur interest charges.

The ability to buy now and pay later outmatches other forms of payment, such as debit cards or cash, which both require you to have the money available for payment at the time of purchase. In addition to having more flexibility with payments, credit cards help you to establish a credit score so you can qualify for other financial products, such as loans and mortgages.

There also can be some monetary perks to having a credit card, where cardholders can earn rewards on every purchase, which can be later cashed in for travel, statement credits and more. Some credit cards also offer intro interest-free periods.

How New Zealand credit cards work

Credit cards are rectangular pieces of plastic or metal that can be used to pay for new purchases by swiping, tapping or inserting your card into a card reader at checkout. Plus many cards allow you to complete balance transfers, which provide the opportunity to get out of debt.

When you open a credit card, you receive a credit limit that can range from a couple hundred to thousands of dollars. You’ll be able to spend up to that limit.

When you make a purchase with your card, it will show up as pending on your account and post within a few days. Once the transaction is posted to your account, your total balance will increase.

Expect to receive a bill from your card issuer every month that consists of all the posted purchases you made during your billing cycle. In order to keep your account in good standing, you’ll need to pay at least the minimum amount by your due date (which is the same date every month).

Learn More

What is a Credit Card?

Credit cards are a great way to build credit and can provide expanded buying power. Familiarise yourself with what a credit card is, so you can benefit from using one.

Types of credit cards

There are thousands of credit cards available to consumers, making it hard to settle on just one. Thankfully, most credit cards fall within a handful of categories, so you can narrow down your choices.

Common credit card terms

  • Annual fee: The fee cardholders are charged every year for holding a credit card.
  • Balance transfer APR: The interest rate for balance transfers, which may be equal to or greater than the purchase APR.
  • Balance transfer fee: Transferring debt from one card to another may cost you 3% to 5% per transfer.
  • Cash advance APR: The interest rate you incur if you take out a cash advance, which is often one of the highest APRs you can be charged.
  • Cash advance fee: The fee you’re charged for each cash advance, usually 5%.
  • Foreign transaction fee: Purchases made outside New Zealand may incur a fee per transaction, usually 3%.
  • Late payment fee: When you pay your credit card bill late, you may incur a fee up to $40.
  • Minimum payment: The smallest amount of money you have to pay each month to keep your account current. (Learn how making only minimum payments on credit card debt could cost you thousands and take over a decade to repay.)
  • Penalty APRWhen you pay late, card issuers may penalize you with an interest rate that’s higher than your regular APR.
  • Purchase APR: The interest rate you incur for new purchases that aren’t paid in full every billing cycle.

Pros and Cons


You can make a purchase now and pay it off at a later date.


If you don’t pay your bill in full by the due date, you may incur interest charges and fall into debt.

Credit cards are widely accepted forms of payment. Some merchants may limit what type of credit card networks they accept.
Paying with a credit card is convenient. You’re more likely to overspend with credit cards versus cash or debit cards.
You can build a good credit score by paying on time and keeping a low balance. Maxing out your card or missing payments can cause your credit score to drop.
Many credit cards offer rewards, welcome bonuses and statement credit benefits. You may be tempted to overspend in order to earn rewards or perks.
If your credit card is stolen, you have limited liability ($50 max) from fraudulent charges. Credit cards can be skimmed at gas stations, stolen, hacked online or exposed in data breaches.

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