There's a fox in the hen house of personal finance. It's called a credit card.
Most people have little plastic friends. They may also have Farmers Card, QCard, Gem Visa and other store cards, which are credit cards disguised as hire purchase.
I sometimes wonder if there should be warnings on credit cards as there are on cigarette packets. After all they can inflict plenty of damage.
According to the Reserve Bank, we're paying an annual $671 million in credit card interest, roughly $200 for every adult New Zealander. Many of us won't be paying any interest at all and some people - often the ones who can least afford it - are paying way more than $200 a year.
Another interesting Reserve Bank fact is that 68.9 per cent of the outstanding credit card debt is interest bearing. That means it belongs to people who don't pay their bill in full every month.
The many dangers of credit cards far outweigh their benefits. Let Mr Fox into the hen house and you'll see the teeth bared, not the cuddly, furry Basil Brush of our childhood memories.
Even those of us who feel smug because we pay ours off in full at the end of the month and pocket the points are fooling ourselves.
These are some of the downsides:
Using credit cards makes spending money too easy and allows us to fritter away cash we don't have - although some would see this as a positive.
It's hard to keep track of what you've spent.
They stop you meeting your goals. It's too easy to say "just this one little purchase".
Interest rates are high, adding cost to everything you buy. Fees for late payments and spending beyond your limit make matters worse.
It's easy for credit card debt to spiral out of control.
Credit cards can destroy your credit record. It just requires a few missed payments and, whammo, you can't get a mortgage, or it even affects your ability to get a job.
Debt problems can lead to depression and family rows have even led to suicides. The stress can cause other health issues. One report suggested people with high credit card debt drink more, smoke more and use more prescription drugs for depression than the average person.
It's the behaviour that matters most in this fox-in-the-hen house scenario. There are all sorts of lies we tell ourselves. One is that everyone has a credit card balance.
The first sign that your credit card is damaging your personal finances is that you're paying interest and/or fees. That includes interest from accidentally missing the repayment deadline. That is money you could be saving or investing.
Other warning signs include that you worry about your credit card debt, that you're using your cards because it's a necessity rather than convenience and you're transferring balances from one provider to another simply because you can't afford to pay your bills
Even people who pay their bills in full are damaging their personal finances, says Tom Hartmann, blogger at Sorted.org.nz. Here's why: budget advisers who deal with real people's spending say using a credit card results in us spending about 30 per cent more than we would with cash. It sounds hard to believe but scientists studying the human brain have found a trade-off between pain and pleasure when spending cash, but we only feel pleasure when we buy something on our credit card. The pain is delayed until we receive the bill.
"Our credit cards are not even plastic anymore," says Hartmann. "They are pre-loaded into [web]sites online and we don't even have that experience of taking a credit card out of our wallet and giving it some thought before making a purchase."
Pushpa Wood, director of the Fine-Ed (Financial Education) Centre at Massey University, adds that money is becoming invisible. "Therefore when we are spending on credit cards we are not really making a connection between the amount we are spending and the amount we can afford to spend," Wood says.
That means otherwise sensible people make dumb spending decisions with credit cards.
It's very easy to click Buy Now on your favourite online shopping website without considering how much you've already spent in that category this month. The only solution is to not have credit cards.
Not even for emergencies, says Hartmann. That's because most people aren't honest with themselves about what an emergency is. It's not having to buy a dress or electronic item because it's on sale and won't be there next month.
That's just poor spending habits, not an emergency.
If people use credit cards for "emergencies" such as paying the power bill or rent, they'll do it over and over again and it will become cyclical, says Hartmann.
They become everyday emergencies and happen repeatedly.
It's best to build up a real emergency fund of three months' living expenses and keep it in a separate account. It's much harder to touch a lump sum of money than whip out the credit card and dispose of the problem in one swipe.
If you don't pay your balance in full each month you should be on a low rate credit card, says John Roberts, managing director of credit reporting agency Veda. At the time of writing ANZ's Low Rate MasterCard was 6.05 per cent cheaper than its standard card.
The fee was higher - at $58 compared to $30. If you consistently have $2000 outstanding on the card you'll pay $437.58 interest in one year at 19.95 per cent and $296.41 on 13.90 per cent. You'll be $113.47 better off with the low rate card.
According to Canstar's credit card star ratings report the best cards for someone who pays only the minimum balance each month are ANZ, ASB, Kiwibank, the Warehouse and Westpac's low rate MasterCard. The lowest fee of all of those cards was Kiwibank's.
"[Low rate cards] offer a revolving credit line, which can be far less than getting a loan from a pay day lender or smaller finance company," says Roberts.
"They allow people to meet monthly commitments where they may have a gap in their own cash flow and so long as they budget to pay down the balance or a good part of it they can be a very useful tool."
Remember, however, if you run any balance at all you're paying more for everything you buy than the next person.
More for your groceries, more for your clothing, more for your electronics goods and so on.
You don't even know how much more, most of the time, says Hartmann.
That depends on how long it takes you to pay the balance off. In the meantime the cost of those groceries or dress is rising month by month.
Some people replace their credit cards with Visa or MasterCard debit cards.
This is only a partial solution. Debit cards allow you to spend only the money that you actually have.
But the pain is still less than paying with cash.
Our overall credit card debt isn't rising, says David Tripe, associate head of the School of Economics and Finance at Massey University.
That's a good thing. In part, however, it's because banks are happy to refinance outstanding debt on to mortgage loans, says Tripe.
This may seem like a good short-term solution to credit card debt, but it's a dangerous way to operate. Suddenly erstwhile "bad spending" becomes "good debt".