Not only are there different types of credit cards but there are also several forms of credit available on most credit cards. Many credit card consumers assume that there is only one type of credit and this can be an expensive lack of knowlege. There are generally three types of credit that a credit card lender will give on a typical credit card and it is important to know which is which as different rates of interest usually apply to the different types.
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St George Vertigo Purchases : 13.24% p.a. Balance Transfer:0.99% 12mths Annual Fee: $55 Interest Free Days: Up to 55 Cash Advance : 21.49% p.a. More Info |
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There are three main types of credit that can appear on a credit card statement. The first is the credit that applies to purchases , the next is the balance that is transferred from another credit card and the last is the credit that has been granted via the cash advances. Where most Australian credit cards are concerned these will each attract a different rate of interest.
Purchases or spending on a credit card is the most obvious type of credit card balance. This is when a credit card is used to buy an item and the credit card is charged with this amount. Some of the lowest interest rate offers that are advertised, particularly the introductory offers, introductory purchase rate offers. These low and in some cases 0% offers on purchases only apply to the purchses portion of credit.
The next type of balance is a balance that arises from a balance transfer. Balance transfers are when there is money that has been transferred from an existing card to a new card. Many of the very low interest rate offers that are advertised, particularly the introductory offers, are balance transfer credit card offers. These low and in some cases 0% offers on balance transfers only apply to the balance transfer portion of credit.
Credit is also given by the credit card lender in the form of cash advances, when cash is withdrawn from an ATM. These are usually charged at the highest rate of interest 9 in many cases in excess of 20%) and interest is generally charged on the amount immediately – meaning that interest free periods do not apply.
Some credit union and building society credit cards are starting to break this trend offering cash advance rates at the same rate as purchses, but these are few and far between and even these do not offer interest free days against the cash advance form of credit.
