Keep your credit card in check

From small beginnings in the 1950s, credit cards are now a staple for wallets and purses around the world. Today, you would struggle to find a business which does not accept payment by credit card as this payment option is the norm for many. While credit cards can be a handy option when your own money isn't readily available, they also carry a number of risks. However, if you manage your credit card well, you can effectively reduce the risks.

Most importantly, before you sign up for any credit card, you need to fully understand the terms of the agreement, including fees and charges. If you don't understand something in the contract make sure you get independent advice before signing otherwise you may end up in a financial hole later on.

Get the most out of your card by using these four tips:

Be clever
If you use your credit card wisely, you can avoid unnecessary fees and limit the amount of interest you are charged. Use these tips to ensure you use your credit card wisely:

Pay on time - always pay your credit card bill by the due date - whether you pay off the balance or just the minimum payment. This way, you can avoid paying a late fee and minimise interest. Use your phone or diary to remind yourself the payment is due if you are likely to forget.

How much to pay¬ - you should aim to pay off the balance of your credit card each month. This may not always be possible but it can save you a considerable amount of interest. If this is not feasible, try to make as large a payment as possible. Either way your payment must cover the minimum monthly payment so you aren't charged additional fees and interest.

Credit limit - take a look at your credit limit. Is a higher limit really necessary or could you reduce it? You want to make sure your credit card maintains a manageable balance and if a higher credit limit jeopardises that, have your limit set lower. And be very wary when your credit card provider offers to increase the limit. Before you apply for a credit card, check the provider's policy on changing the limit as some will not reduce their credit limits below a certain point.  

Slow use - if you are struggling to pay off your debt, you need to limit your credit card use. Take the card out of your wallet or purse and consider whether you even need a credit card. Many of today's debit cards function as a Mastercard or Visa card but they allow you to access your own money. Also take a look at your monthly spending and consider setting yourself a budget.

Check statements - make sure you check your spending carefully by using internet banking or reviewing your monthly statements. If there are any errors, you need to bring them to the attention of your credit card company before the balance is due.

Transfer your balance - if you have more than one credit card, you can save yourself money by cancelling one card and transferring the outstanding balance to the other. Just be sure to move the outstanding balances to the card with the lower interest rate.

Be cautious
While credit cards can be a very convenient if you don't have cash readily available they also open you up to a number of threats including fraud. There are a range of things you can do to reduce your risk.

Sign - when you receive a new card, sign it straight away. This immediately makes it harder for somebody else to use the card. Also, be sure to destroy old cards as soon as possible by shredding or cutting it into small pieces.

Treasure your card number - your credit card number is how fraudsters access your credit card so make sure you destroy any documents which include the card number. Also make sure you never fax your card number, you never know how long the fax might be sitting in the fax basket or in someone's in tray.

Be vigilant - be cautious providing your credit card details over the phone or online. Only provide your credit card details during phone calls you initiated and with organisations you trust. Similarly, check websites for a secure connection before entering your credit cards details online.

Call immediately - if you suspect any trouble or fraudulent activity on your credit card, call your credit card provider immediately. All providers have a 24-hour lost and stolen helpline in the event of your card being lost or stolen so the card can be blocked as soon as possible.

Be thorough
Before settling on a credit card, make sure you do your research to ensure it suits your needs. You ideally want a card with a great interest rate, small or no annual fees and any extra features that may be on offer. Many credit cards today offer additional features like frequent flyer points, rewards programs or are linked to charitable organisations. Programs like these are worth considering but can also come with higher interest rates or fees that other credit cards don't. Be careful when considering cards with interest free periods or a great interest rate for transferring the balance of an existing card. These offers are often short lived so make sure you look into the fees and charges once the 'honeymoon' period is over.

Be proactive
It pays to review your credit history regularly, particularly if you are a frequent credit card user. Credit cards are intrinsically linked to your credit report - any defaults or severely late payments are recorded on your credit file and any time you want to increase your limit or apply for a new card, you credit report is checked. Regularly reviewing your credit report allows you get on top of any errors quickly to ensure your history is accurate.

Checking your report is simple - it can be supplied at no charge within 10 business days; otherwise for just $30 you can access your report instantly »

If you are struggling to keep your money in order read Tips to help manage your finances »