Making credit work for you is about keeping your credit cards in tip-top health and keeping you in control.

What is credit?

Credit is simply borrowed money that allows you to buy goods now and pay for them later or over time. All credit involves a potential cost – be it the annual fee and the interest rate you might pay for your credit card, or the interest rate you pay on a car or home loan.

The pros and cons of credit cards

Credit cards are a very common form of credit used to pay for day-to-day purchases. When managed carefully, credit cards can help you gain and achieve the things you want faster, and can cover you in cases where you don't have cash on hand to meet bills and expenses.

However, the use of credit cards do require careful management to make sure you enjoy the benefits without falling into any of the common credit traps. These can include:

• making purchases you can't really afford to pay off;
• accepting offers to increase your credit limit without considering whether you really need to or whether you can afford it;
• missing a repayment and incurring interest and late fees;
• only paying minimum repayments and accuring interest and longer-term debt; and
• taking out more credit cards to increase your credit limits and using these new cards to pay off existing credit card debts.

Many people who've fallen into one or more of these traps can vouch for how easy it is for a credit card debt to spiral out of control. But the good news is that it is possible to keep your credit card in good shape…

10 ways to keep your cards in shape

1. If you don't think you can manage repayments on a credit card, don't get one.
   
   
2. Choose a credit card that is right for you. Shop around among different financial institutions, ask questions if you're not sure what's being offered, and always read the fine print. Interest rates, annual fees, interest-free periods and features such as bonus points may vary from card to card, and you'll need to do your home work to be satisfied you're getting a product that suits your needs.
   
   
3. Only charge items to your card that you know you can afford to pay off within a realistic time frame, and be aware that most credit cards charge additional fees and higher interest for late repayments.
   
   
4. Limit the number of credit cards you have. Fewer cards mean fewer annual fees and fewer interest rates to keep track of.
   
   
5. Consider carefully any offers to increase your credit card limit. Do you really need more credit? Will you be able to manage it? Don't just accept it because your financial institution offered it to you – they generally do not make these offers based on any assessment of your financial situation. You are usually the best judge of whether you really need the additional limit and, more importantly, whether you can afford to repay it.
   
   
6. Think about decreasing your credit limit if you have more credit than you really need (or can afford). This can reduce the opportunity for unnecessary spending and may help you keep your card under control by reducing the likelihood that you'll overextend yourself.
   
   
7. Talk to your bank or financial institution if you get into trouble paying off your credit card and see whether you can organise a payment schedule that works for you. The sooner you identify the problem and notify the institution, the sooner you may be able to get the situation under control.
   
   
8. Always pay at least the minimum repayment by the due date, and if possible, pay more than the minimum – the more you pay, the faster you can reduce your credit card debt. Even better still, see the next tip!
   
   
9. For the ultimate tip in good credit card management, if you can, always pay the full amount owing on your credit card by the due date. With many cards (e.g. those with "interest-free days"), if you pay the full amount owing by the due date (and not just the minimum), you won't incur any interest on your purchases at all. If you can consistently manage your credit cards in this way, it's normally a good sign that you're living within your means.
   
   
10. If considering getting a cash advance on your credit card, be aware that these transactions may incur interest from the date you obtain the advance until the date the advance is paid off in full – which can prove very costly. You may also incur a separate cash advance fee, which is usually around 1.5% of the cash advance amount.

For more information

• Baycorp Credit Advantage
  Baycorp Credit Advantage is the largest custodian of credit-related information in Australia and can provide consumers with their credit report and associated information.
  http://www.mycreditfile.com.au
  
  
• Dun And Bradstreet
  Dun And Bradstreet provides in-depth and accurate credit information on millions of Australian residents – consumers, partnerships and sole traders – available instantly.
  http://www.dnb.com.au
  
  
• FIDO
  FIDO is a website created by ASIC to provide consumers and investors with financial tips and safety checks.
  http://www.fido.asic.gov.au
  
  
• How Credit Works
  The 'A Guide to Credit' website provides general information on how to use and manage credit along with contact information for credit reports and financial assistance.
  http://www.howcreditworks.com.au