Credit Card Smart Guide

1. Do you need a card?

What you'll learn in this step: like it or not, it's hard to live without plastic.

For most people, credit cards are a way of buying now, paying later - they're bringing forward purchases of goods and services such as clothing and holidays rather than waiting until they've got the cash in the weeks or months ahead.

Those with good habits will pay off their credit card balance each month - or at least a good portion of it. They use their credit card to "smooth" out their spending over the course of the year.

Unfortunately, for a minority of people plastic isn't so fantastic. They're using their cards to buy things they want but can't really afford - now or later. They can't pay their card off in full at the end of the month, and their debt seems never-ending.

That said, in this day and age it's a big step to live without a credit card. Have you ever tried buying something by phone or on the internet without a card at hand? How many times have you handed over a credit card, complete with signature, as identification? How much harder is it to pay your bills in person as banks and businesses close physical branches?

Like it or not, credit cards are a part of life for most people. That's why it pays to be familiar with the different characteristics of the various types of card, so you can choose the right mix of interest rate, fees and features for you. Once you've got a card, handle it with care.

Learn more:

Plastic is fantastic - if you're in charge, David Koch, June 4, 2006 - The Sun Herald. The banks don't need your extra money, so check out those credit card rules.

Life in the red, Brigid Delaney, June 21, 2006 - The Sydney Morning Herald. Our profligate ways may topple the house of cards.

Credit card debt blows out to $36b, Kerry-Anne Walsh, August 13, 2006 - The Sun Herald. Australians are carrying an incredible $36 billion in credit card debt - and the figure is rising as petrol prices and interest rate increases bite into the family budget.

Zero sum game, Barbara Drury, August 3, 2005 - The Sydney Morning Herald. Credit and charge cards are Australia's fastest growing area of household debt and, in a worrying sign of things to come, the younger people are when they get their first credit card, the higher their average debt.

You wouldn't credit it, disgruntled cardholders say, Kelly Burke, July 25, 2006 - The Sydney Morning Herald. Almost three out of four holders of credit cards are fed up with them because of increased annual fees and meaningless rewards programs, a survey has found.