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Credit cards have great utility. Used wisely, credit cards help you accomplish many things, including the very important task of managing your cash flow. Used without care, credit cards can plunge you into a deep debt that will you will struggle to pay off over years.

Debt does not stay as just a money issue but can rip lives apart. At its worst, the pressure of debt could expose personal and family relationships to enormous stress. So you don’t reach that point it’s worth considering how to use credit cards responsibly. Appreciate the advantages that credit cards offer over other payment methods but don’t forget it is still real money so don’t get carried away. Below are a few ideas.

• Avoid making minimum payments. Try and pay the balance off in full each month if you can. This is the best way to minimise interest charges. Even if you can’t pay it off in full you should try and pay as much beyond the minimum as you can afford. Credit cards set their minimum payment at only 1.5 to 3 per cent of your outstanding balance. At say 2.5 per cent, this is only $25 for every $1000 in your account. Even if no interest and fees were added, it would take you 40 months — that’s 3 years 4 months — to pay off the principal. When you include interest (average APR is 16 per cent) and fees, why, you would need at least 11 years to clear the $1000 debt. To see exactly how much quicker you could clear your own debts by raising your repayments search online for a ‘debt repayment calculator’ and see how the interest paid drops.

• Arrange for a lower credit limit. The credit limit allowed on credit cards is not meant to be taken as an obligation to spend that much. These invites are like an invite to place yourself into debt, take a stand and call your card issuer and request a lower limit that you know you can control. Set it at a level that you can comfortably repay.

• Avoid making late payments. If you miss the due date for the statement then you can be hit with late payment fees which can be very high as well as extra interest. The expense is totally avoidable on your part. It also adds to your outstanding balance.

• Pay early. Aside from protecting you against late-payment fees, this works to your benefit if you usually carry a balance. Most credit cards use the average daily balance method to calculate interest. Paying early in the month lowers your outstanding balance for more days in the billing cycle which reduces your interest.

• Monitor your spending. These days all credit cards come with online banking. You can use these to check how much you have spent during the month and the amount that will be included in your statement for the month. This gives you enough time to prepare for the payment when it comes due.

• Stay away from cash advances. If you are making cash advances from credit cards more frequently, you really need to review your budget. Cash advances are expensive. Many issuers charge around 3% of the withdrawal as a instant transaction fee. There is no interest-free period on cash advances and the interest rate is often higher than that for purchases.

• Choose the best credit cards for your needs. Your credit cards should suit your spending habits. If you normally pay off your balance in full each month (called a “transactor” in the industry), the interest rate on your credit cards won’t matter at all; instead you’ll want longer interest-free periods and probably a rewards program. If you usually carry a balance (called a “revolver”), low interest rates are extremely important. Be true to yourself, it you know you won’t pay your statements in full then choose a suitable credit card for your spending habits.

Manage the way you use your cards and use these tips and tools to help. They can be very handy tools in achieving some of your goals.

This finance article is by lowinterestcreditcards4u.co.uk co-founder Richard Greenwood which compares cards and products including Reward credit cards. Visitors can compare products side by side and then apply online.

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