The worst mistakes you can make with your credit card are:

1. Paying only the minimum balance. You will lose the interest free period on new purchases and it will take a long time to repay your debt.

2. Having too many cards. It is much harder to keep track of your total debt when you have multiple cards.

3. Using cards for non-essentials. Getting into debt to buy luxury goods will set you back financially.

4. Not getting the best deal. There are big differences between cards when it comes to interest rates and features. Choose the card that is right for you.

5. Forgetting to pay or paying late. You will add to your interest bill and your credit rating may be affected.

6. Having too high a credit limit. The higher your limit, the more you may be tempted to spend and the harder it will be to pay off your bill each month.

7. Being tempted with low interest offers. Look at the fine print before you accepting an offer to get a new card at a low interest rate.

8. Refinancing without reducing your limit. Increasing your mortgage to repay your card will reduce your interest if you are maxed out, but only if you stop spending on your card.

To use your credit card to advantage, set the limit to a level that you can afford to pay off every month by direct debit. For emergencies, have a second card with a higher limit which you keep hidden in a safe place (not your wallet or purse!)

Article by Liz Koh

Liz Koh is a financial adviser. Her disclosure statement can be obtained free of charge by calling 0800 273 847.  Author of Your Money Personality; Unlock the Secret to a Rich and Happy Life, Awa Press, March, 2008.  For free eBooks, go to www.moneymax.co.nz and www.moneymaxcoach.com

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