The insidious hidden costs that come with using a credit card
Wednesday, 8 July 2026
Card payments reduce the psychological pain of paying, making it easier to overspend and accumulate debt.
Paying only the minimum on rewards cards incurs high interest that quickly outvalues any points earned.
Creating intentional spending friction and understanding true interest costs helps build effective financial habits.
Katie Wesney is a qualified financial adviser and national coaching lead at Enable Me.
OPINION: You reach the checkout, tap your card and walk away. No counting notes, no handing over coins, a quick swipe with hardly enough time to register what you’ve just spent.
That’s not just convenience. It’s psychology and understanding it matters because it changes how we think about our spending choices.
Behavioural economists call it the pain of paying. Hand over physical notes and your brain can register a tangible exchange of money for goods and services, right there, in your hand. Tap a card and that loss barely registers at all. It’s a quirk of how our brains process money, not a character flaw. Add a rewards programme on top of that and the system is working exactly as designed: you feel the cost less, and you’re thanked for spending more.
It’s why credit card debt rarely starts with one bad decision. It’s usually dozens of perfectly reasonable ones: dinner out, few online purchases, new shoes because they were on sale, a grocery shop that crept past what you meant to spend. None of it feels significant at the time, because it isn’t designed to.
Here’s what that can cost you.
Say you put $1,000 on a typical rewards card at around 21 percent interest, and you pay the minimum each month, as plenty of people do when money’s tight. Most minimum payments are a small percentage of the balance, so the amount shrinks as the debt does. At that pace, $1,000 takes close to eleven years to clear, and you’ll pay roughly $1,400 in interest along the way.
Your own card may charge a different rate or set a different minimum, but the shape of it holds. The way minimum payments work means debt can linger for years.
Now look at what that $1,400 bought you. Spending $1,000 on most rewards cards earns somewhere around $10 to $20 in points. The interest cost is many times the value of the reward.
If you’re paying interest, the rewards are easily outweighed by the cost of carrying the balance.
None of this is an argument against rewards cards. If you clear the balance every month and never pay interest, the points are a genuine, no-strings bonus, and plenty of people manage exactly that. The only thing worth knowing is which category you’re in, because the maths only bites if a balance carries over.
The point isn’t that we’re irrational. It’s that we’re human. Small changes in how choices are presented can influence even financially savvy people. Understanding those patterns doesn’t make you immune to them, but it does help you build habits and systems that work in your favour instead of against you.
There’s a reason casinos use chips instead of cash. Spending a chip doesn’t feel like spending money, even though it is. It’s not that anyone using chips is being careless. It’s that our brains genuinely process the two differently, and casinos simply built their systems around that fact.
Credit cards do something similar; it’s just less obvious.
It’s why some people choose to make their spending visible on purpose. A debit card for everyday purchases. A weekly cash amount set aside for the things that are easy to lose track of. Not because they lack discipline, but because they understand that even disciplined people respond to friction, and a small amount of friction can be a useful ally rather than an inconvenience.
It’s also worth knowing what your own credit card statement is and isn’t telling you. And what it includes is often different between different countries, based on their government policies.
In Australia, banks are required to show customers a personalised calculation right on the statement: how long it’ll take to clear a balance on minimum payments, and what that costs in interest.
Whereas in New Zealand, banks have to warn that minimum payments cost more and take longer, but they generally point you to a debt calculator instead of doing the sum for you.
The number exists either way. And it’s important to know it. It’s just a question of whether your bank hands it to you or you have to go looking.
If you’re carrying a credit card balance, the points are the least useful number on your statement. The interest figure is the one worth a proper look, because it has the highest impact on what you’ll repay in the end.
None of this means cutting up your card or carrying cash for everything. Convenience has real value, and for people who pay in full, so do the rewards. The smartest financial decisions aren’t always about having more self-control. They’re often about building a system that works for you, instead of against you.
Disclaimer: The information in this article is of a general nature and is not intended to be personalised financial advice. It does not take into account your individual circumstances or financial goals.