Credit Card Guide

How does a credit card work?

A credit card is an unsecured, revolving credit line, allowing you to borrow money to make purchases, up to a certain limit, based on your ability to make repayments. At the end of each billing cycle, the credit card provider sends a statement of the total amount owing for purchases for that period.

Unlike a debit card, where you’re using your own money to make purchases, a credit card allows you to use money owned by the credit card provider.


  • You must make a minimum payment amount each month to avoid penalty fees. If you cannot pay your credit card off in full each month the interest rate on the purchases is usually a high rate.

What are the features of a credit card?

Credit Limit

This is the maximum amount of money you can borrow using your credit card.


The fee you pay the credit card provider on money spent using a credit card. Interest is calculated as a percentage of the amount owing. The interest will be different depending whether you’ve used your card for purchases or cash advances.

Balance transfers

You can choose to transfer the outstanding balance of your credit card to an account held at another credit card company. The new card issuer makes this arrangement attractive to consumers by offering incentives, such as low interest rates, a temporary interest-free period, loyalty points or other incentives. The temporary interest free period is the most common incentive.

Reward programmes

A feature which adds value by offering points such as Fly Buys, Airpoints or other rewards when you use your credit card to make eligible purchases.

Contactless payments

The ability to tap your credit card against a contactless reader to complete a purchase under NZD$80. Alternatively use a compatible smartphone as a mobile wallet connected to your credit card where contactless payments are accepted.

How do I apply for a credit card?

To be eligible for a credit card, you must have a good credit history. The bank or credit card provider will want to see proof of income as well as documents to verify your identity.

Most providers will allow you to apply for a credit card in your own name or as a joint account. If the account is in your name only, you will be able to nominate additional cardholders who can use your line of credit. It will be up to you to repay the balance. Typical eligibility criteria are;

Minimum income

The credit card provider will need to be satisfied you can make repayments each month, over and above your other living expenses.


In New Zealand, you must be at least 18 years old to apply for a credit card in your name, as this is the age you are legally considered an adult and can be liable for debt.

Residential status

You must be a citizen or permanent New Zealand resident. Some financial institutions will allow applications from people who hold a student or temporary resident visa.

Good credit history

To be eligible for a credit card, you must have a good credit history. If you have not yet accumulated any credit history, you may be eligible for a credit card with a low credit limit. As you build a credit history by using your credit card, you can apply to increase the credit limit.

What credit card pitfalls should I be aware of?

Credit cards are expensive if not paid off

If you don’t pay the minimum payment on your credit card in each payment cycle, expect to be charged a high interest rate as well as late fees. Your card will also be flagged at the collections department of your credit card issuer, which can create a lot of extra hassle.

Credit cards cannot be paid off using other credit cards

The balance of your credit card must be paid off with money in your bank account. Credit card providers have strict rules which will not allow you to pay off one credit card with another.

Don’t focus too much on the rewards

The incentives offered by credit card providers such as Fly Buys or Air Points rarely hold a benefit above 2% of what you spend. Don’t be tempted to overspend to try to reap the rewards.

Avoid withdrawing cash on your credit card

The interest is high and starts getting charged as soon as you make the withdrawal. Also, there could be additional fees and you won’t earn any rewards.

Be careful of moving your credit card debt

If you are being charged more than need be with your credit card provider, you may look to reduce the interest charges by transferring the balance to a new provider with an introductory offer of a low or 0% interest rate. Keep in mind the introductory interest offer will eventually run out and the debt you have transferred still needs to be paid.

Beware of hidden charges

Always reconcile your monthly statements, checking them against receipts or your own records of purchases you have made during the month. Make sure the correct amounts have been charged and keep an eye out for unexpected charges you might not need, for example, subscription or membership fees you didn’t know were still renewing.

Credit card checklist

  • Pay off your balance each month

    You can avoid interest charges by paying the entire balance of your credit card each month by the payment due date.

  • Shop around

    Credit card providers differ with the interest rates they charge and incentives they offer. If there is a card feature you want, ensure you have a good look at our credit cards page to get the best deal.

  • Get your applications in order

    Once you’ve decided to apply for a credit card, get all your documentation in order to make the application process run smoothly. You’ll need photo ID and proof of income. Check with your credit card provider about anything else they require and have the documents prepared to take with you.