Columnist Lisa Dudson

Top tips for credit cards:

1. Think twice. If you don't think you can manage to make repayments on a credit card, don't get one.

2. Shop around. Make sure you choose the credit card that is right for you. Interest rates, annual fees, interest free periods and features such as reward points vary from card to card. Shop around, ask questions and make sure you read the fine print.

3. Only charge what you can afford. Only charge items to your credit card that you know you can afford to pay off within a realistic timeframe. Remember that most credit cards charge additional fees for late payments.

4. Stick to one card. Limit the number of credit cards you have- you shouldn't need more than one. Fewer cards mean fewer annual fees and fewer interest rates to keep track of.

5. Limit your limit. Consider carefully any offers to increase your credit card limit. Do you need more credit? Will you be able to manage it? Think about decreasing the limit if you have more credit than you need or can afford.

6. Stick within your limit. If you make a transaction that takes you over your limit, you should pay the excess amount immediately. If you don't, your bank may charge an over-limit fee, and you'll still have to pay it back!

7. Avoid cash advances. Cash advances and cash-equivalent transactions (eg. using your credit card to get cash from a branch or ATM or to pay another credit card account) are a costly way of getting access to cash, as they incur interest from the date you make the transaction until the date you pay the transaction off in full.

8. If it gets hard, get help. If you have trouble paying off your credit card, don't be afraid to talk to your bank to see if you can organise a payment schedule that works for you.

9. Know what you're spending. Read your statements - either when they arrive in the mail or via Internet Banking - and make sure you understand the fees and charges.

10. Pay it off regularly. Try to pay off your credit card every month - or, if that's not realistic, pay more than the minimum repayment. The more you pay, the faster you'll reduce your credit card debt. The new ANZ Everyday Rewards Visa is New Zealand's only credit card which gives you Reward Points for paying money back.

When credit cards are useful:

- Credit cards are a convenient method of payment and a substitute for cash.

- You can take advantage of a credit card's interest-free period to earn rewards and manage your accounts.

- Orders can be placed easily by internet, mail or phone.

- Credit cards consolidate many purchases into one payment.

- Good identification (required for cashing cheques and most car rentals).

- Automatic record keeping - you can see exactly where and when you used your card.

- You have leverage against the merchant if a problem arises. Your dispute/claim will get prompt attention when the merchant knows your payment can be delayed or disputed.

Understanding credit cards - some basic principles:

- Interest is money paid in return for the use of money. If the bank is using your money (in a savings account) they pay you interest. If you are using the bank's money (via a loan), you pay the bank money.

- Most credit cards offer an interest-free period. This means you can use the bank's money, and providing you pay it back in full by the due date, you won't pay any interest.

- If you don't pay off the whole amount owing in full each month, you will be charged interest for the outstanding balance.

- There is a minimum payment - usually around 3% of the balance - which must be paid by the due date. If you miss making the repayment, you will be charged a 'late payment' fee.

- Not all purchases are eligible for interest-free days. If you make a cash advance (withdrawing cash from your credit card) or use your credit card to buy cash substitutes (such as travellers cheques and gambling chips), you start paying interest immediately. Interest on balances transferred from another bank's credit card or store card onto a credit card is also charged immediately.