Is your wallet full of plastic? Most people rely heavily on their credit cards for much of their day-to-day spending. It's worth keeping in mind some simple rules.

Don't borrow more than you can repay: Credit cards have stubbornly high interest rates. Don't rack up more in purchases than you can repay each month. Do everything you can to avoid paying just the minimum - a credit card balance of $2000 repaid at the minimum rate at the major banks would take between 14 and 20 years to clear and cost at least double the original balance.

Don't have too many cards: If you're going to apply for credit soon, it's worth cancelling cards you don't need. Most banks assess your liabilities based on the credit card limits you have, not the balances you're carrying. Fewer cards makes you look like a better borrower. You'll also save annual fees.

Know your interest-free period: Most cards have a period of time they allow before purchases start attracting interest. Check how long this is. Beware that if you have any balance left over from the previous month, this interest-free period probably won't apply.


Check your rewards: Rewards are a nice bonus, but only if it makes financial sense. Some cards require such a high annual fee that you'd have to be a big spender before you saw any return from the rewards they offered. Every six months or so, check what you've redeemed in rewards and what you've spent in fees. You might find a low-fee card is a better option.

Don't ignore your business cards: Because business debt is generally tax-deductible, some businesspeople tend to worry less about the balance they carry on their work credit cards. But credit card debt is expensive wherever it is, so get rid of it if you can.

- Jeremy Tauri is an associate at Plus Chartered Accountants.