Key Points:

It's all too easy to pull out the plastic and pay by credit card these days. But are there some things you should never pay for on credit? The Herald spoke to Retirement Commissioner Diane Maxwell and Auckland budgeting expert Christine Liggins to get their big no-nos.

1. Surchargeable purchases

Maxwell says consumers should think twice about paying for any large purchases with a two or three per cent surcharge. "Anything that involves a surcharge on bigger items like booking a holiday or flights or petrol or a cab - the little things don't matter so much but two or three per cent on a holiday can add up." Maxwell said people needed to take a moment to calculate the extra cost and work out if it was worth it. "Think about what does that extra money represent - for some it could be 10 cocktails on my holiday." Maxwell said if you're not sure if something has a surcharge for paying by credit card don't be afraid to ask and then whip out the calculator.

2. Taking out cash

Maxwell said another thing to avoid was withdrawing cash from a credit card. She has heard cases of some older people who take cash out of their credit cards because they are worried about forgetting their pin in the supermarket or taking too long and holding people up but it's a big no-no. Taking out cash could mean you start paying interest on that money straight away meaning you miss out on the 55 days interest free period - one of the main advantages of putting something on a credit card.

3. Pay more to save deals

Be wary of using your card on those deals where you buy one item and get the second one half price - that could be shoes, clothes or handbags. Maxwell said it was easy to shell out for discretionary items when paying on credit card many of which people did not really need. "If you were paying cash you would be thinking about the total amount you were shelling out. Ask yourself if you would buy the items if you were paying cash." Maxwell said people needed to remember they were still spending their own money when paying for things on a credit card.

4. Groceries

Groceries are a big no-no for Christine Liggins as well as anything else which is quickly consumed. She says if you pay for food with your credit card and don't pay it off in full you could be left paying for your bread, milk and weet-bix weeks or months after you have eaten them.

5. A big holiday

Feel like you have earned a break? Can't really afford an overseas trip but really want one? Putting it on the credit card could mean you end up paying double for it. Long after that holiday feeling has evaporated you could still be paying for it at a high interest cost of up to 20 per cent. Diane Maxwell says the key to credit cards is to make them work for you rather than the other way around - and that means paying them off every month. Maxwell, who heads up the Commission for Financial Capability as the Retirement Commissioner said people needed to be realistic about how disciplined they could be. "It's a horrible feeling when you look online and the balance is much higher than you thought it would be and you go back over the transactions and think 'how could it be so high? "I don't know how I got there.' "It's about noting that horrible feeling and reminding yourself what it's like." Maxwell said consumers should ask themselves whether they could handle it and if they were paying by cash would they still purchase the item. Liggins said it was good to have a credit card in case of an emergency. But an emergency should be reserved for certain situations such as a car breaking down and you can't get the kids to school or get to work or a medical issue.
I think they get it with good intentions. Then the school costs come up and they don't stick to it. The 12 months come up and they haven't paid anything off.
Auckland budgeting expert Christine Liggins
"Yes they should be in the budget but if you haven't got $5000 saved up for the car repair that's when you can use it." Liggins said the alternative was to reach an agreement with a mechanic. Liggin said one of the problems with credit cards was there were now so many different ones you could get and people often had multiple cards. They think: "it's only $50 a week I can afford that." But not if they have said that at 10 different places. "So there's that $50 for the gem visa and that $50 for the Q card - they can afford it but not together. Liggins said it was best just to have one card. The biggest debt mistake she sees people making is getting an interest free deal where they don't have to pay any money now. "I think they get it with good intentions. Then the school costs come up and they don't stick to it. The 12 months come up and they haven't paid anything off." She said people also got into trouble because they didn't deal with their debts. "At the end of the day creditors want to talk to you. There are lots of things they will do but you have to talk to them." Many of the people she talks to won't answer the phone or open mail if they are having debt problems. "If you can't pay just let them know."