Credit cards

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Australians are addicted to credit, especially plastic debt, which has now reached $43 billion. The majority of this debt accrues interest every month, a huge chunk also accrues penalty fees.

Of course, a lot of us couldn't survive without our credit cards, but a third of all credit card revenue, $415 million, comes from penalty fees - fees for late payment and exceeding the card limit.

Knowing what kind of credit card user you are, and how different credit cards can vary, can make a difference when it comes to saving money.

Cannex Canstar Financial analyst Peter Arnold crunches credit card numbers everyday and has found there are serious financial traps for the unwary.

"We've got big spenders, everyday spenders, occasional spenders and habitual spenders - and each of those groups of people are after a totally different card."

Big spenders who put $50,000 - $60,000 a year on their card should for cards with big rewards like the ANZ Frequent Flyer Visa, the Citibank Platinum, the NAB Qantas and Velocity rewards card or the Westpac-Altitude Gold and Platinum cards.

These cards do have a higher annual fee but should pay for themselves.

"You're going to be getting $1000 worth of rewards - you'll be getting free travel insurance so if you're travelling that'll pay for itself."

Everyday spenders are usually Mums and Dad's who pay their groceries and bills week to week on the card, who would also benefit from a rewards program but with a few less bells and whistles.

The Coastline Credit Union Rewarder Visa, a credit union gold or silver Mastercard, the GE Money Myer Visa Card, the Qantas Staff Credit Union Lifestyle Plus card and the Woolworths Everyday money card for week-to-week bill payers.

"They might get a shopping voucher for the rewards each month which will just help with a few extra things," says Peter.

The key for both everyday and big spenders is to make sure the entire card balance is paid off every month - if you don't you're what's called a habitual spender.

"This is a situation a lot of people can slip into - they put some money on their card but they don't actually end up paying it off. They'll keep spending, maybe only pay just the bare minimum or just cover what they're spending."

For habitual users its all about interest rates and fees, the lower the better.

"About a quarter of the cards on offer are under 13% and that's what people should be on if they're paying interest on a credit card debt."

So if you have spiralling debt try these - the Bankwest Lite mastercard, Bendigo Bank Basic Black card, Members Equity Mastercard, St George Bank SA Vertigo credit card and Suncorp- clear options standard card.

If you have card debt and you're not with these get out fast.

For anyone who thinks a credit card is a necessary evil for internet purchases look for cards with low or no fees at all like the Heritage Building Society Visa Classic No Frills, the M-E-C-U visa, the New South Wales Teachers Credit Union Teachers credit card, the Statewide Credit Union credit card and the Victoria Teachers Credit union card.

"If you find yourself struggling with any financial debt approach a financial institution and discuss further options. There are options."

One key to managing your credit card properly is reassessing your spending every six months. Reassess your card, as banks are always changing their products.

"Financial products aren't a static thing, you really need to keep on top of them constantly, " Peter said.

"Don't pay too much interest on a revolving credit card debt - if you find yourself with a debt look for a low rate card or a debt consolidation loan," advises Peter.

This advice is telling in Suzanne Grange's case - she's managing a credit card debt of $11,000.

Suzanne was slugged penalty interest for not spending enough.

Suzanne: "...they said I have to use $3000 worth of my credit every month on purchases or cash advances to qualify to get the low interest rate."

"I was quite unaware and blown away by it because I didn't know I had to spend $3000 a month to get a low interest rate."

Further information

www.canstarcannex.com.au