Be credit-wise. Tips for credit cards in Australia.

These days, life without a credit card would be hard to imagine. We have become so used to the convenience of "plastic", we don't leave home without it. (Sound familiar?) While you can't dispute the ease and convenience of not having to pay in cash at the supermarket, petrol pump or pub, here are some handy credit card reminders.

1) Say no to cash advances

Some people just don't get it, but the bank does. The Interest-free periods offered on credit card accounts never apply to cash advances. In the majority of cases, you will pay interest on the cash right from the second you withdraw it from the ATM or over the counter. The dollar penalty can really add up, so it's best not to do it. Ever.

2) Watch out for Store Cards. Loyalty can cost you

How often have you been at the cash register and asked if you would like to apply for a store card? Probably plenty of times. Department stores such as David Jones and Myer may offer you the benefits of customer discounts, added warranties and extended credit, but they aren't cheap. Although you don't pay an annual fee, the interest rate can be considerably higher (sometimes several percent) than alternative credit cards. It's fine to use them for store specials and loyalty benefits, but pay the balance in full by the due date. In this way you avoid being whacked with huge interest charges.

3. Choose a card that matches your lifestyle.

Think about your spending habits and patterns. For example: if you use a card for extended credit and don't pay off the full balance each month, just a basic payment, choose a card with a lower rate. It may not offer any interest-free period, but the lower interest rate should save you more dollars over time.

If you use your card for everyday groceries or filling up the car, go for credit card with maximum interest-free days. Make sure you pay it off in full each month. This way you get the benefit of up to 55 interest-free days on purchases, as well as rewards, discounts and frequent flyer points. But watch the annual fees on rewards cards.

4. Interest-free periods are void unless you pay in full

Don't let your credit card get out of control. To avoid paying interest on your purchases, you must pay the full balance -- that figure in black and white on your statement (not just the minimum payment required) by the due date. If you don't, be warned. You will be charged interest right back to the date of purchase on each item. In effect, you forfeit the interest-free period on those purchases.

5. Search beyond the local banks

These days, there's a lot more choice out there - not just the usual local banks. Look at credit unions, building societies, community banks, boutique and online banks. Chances are you may get offered better interest rates or lower fees than the big banks because these new providers are anxious to win business or they are non-profit organisations. We put this theory to the test. We tried HSBC and came up with 5 different types of credit card.

6. Do you qualify for a "relationship discount"?

If you consolidate your banking business and finances with one lender or bank, you can qualify for a special treatment. Loyalty does have its rewards. You can enjoy home and personal loan interest rate discounts, term deposit bonuses, savings account fee waivers and of course, credit card annual fee waivers.

7. Do you qualify for annual fee waivers?

If you spend enough on your credit card on an annual basis, some institutions offer to waive the annual fee. For instance: If your card spend is more than $5000-$10,000 a year, you could choose a card with all the benefits you want and avoid the annual fee. However, make sure you use your card to make purchases you were going to make anyway. Spending up big for the sake of reducing fees or earning rewards points is false economy.

8. Sweet deals? Don't be distracted by them.

Introductory discount rates, fabulous reward programmes and special insurance offers. Some lenders offer enticements on credit cards that can make a big impression on first glance. Be practical. Look at the overall, ongoing cost of credit of any card option. Compare the standard interest rate, interest-free period and annual fees - and weigh these up against the real value (if any) of the added extras.

Credit cards are great. But remember that you are the one in control and responsible for your debt. If you can't resist a bargain or a shopping centre blitz, leave the card at home. Pay cash.



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