Just ask yourself: is the credit card working for you or are you working for your credit card? Most people's reply to that question will depend on how they treat their "plastic pal" as credit cards are sometimes known. As many people with burned fingers will tell you, they didn't realize that things had become so bad until very late, because most credit card companies try so hard to make themselves sound like a charity. Well, take it from me, they aren't.

And this is not a hate campaign against credit cards. They have their uses - in America if you want to rent a car, you have got to have a (major) credit card. But, consider this scenario:

You get an offer in the post that sounds great, perhaps it's a new television or fridge. But it costs $2,000. You have a credit card with a $5,000 limit, so you go out and buy the item right away. Often, this is how your repayment schedule will work out. Most credit cards charge a minimum percentage of the total balance (usually 2 percent) per month. Assuming the interest rate is 18 percent and you choose to repay the minimum amount of $40, $30 of that will go towards interest and only $10 will come off the $2,000!

Does it sound scary? Well, it doesn't need to be. The moral of the tale is to use the credit card very, very carefully.

Credit Cards Dos and Don'ts

There is a lot of truth in the saying that credit cards are not a substitute for not having money. Every time you use a credit card this should be the theme replaying in your head. And you would do good to remember the following too:

Dos.

1] Always plan for the purchases that you have to have and those that you only want. You need the essentials, but you just want everything else. The ability to differentiate might help you plan sensibly.

2] If you are caught up in financial difficulties, it's always a good idea to talk to the credit card issuer who might re-schedule your repayments. If you just default, that only builds up a bad credit history for you and you could find yourself being denied credit in the future.

3] Unless it is an emergency, staying within your credit limits will help you a great deal. If you must spend over the limit, ensure you are within manageable levels, say within 30 percent.

4] If your letterbox is chock-full of information on credit cards with more favourable deals than you are currently enjoying, you may always approach your issuer for a better deal. They want to keep you as a customer, so they will listen.

Don'ts

1] Do not use your credit card to purchase household goods. It is too expensive in the long term.

2] Do not only pay the minimum amount necessary. You will end up paying exorbitant amounts of interest. The more quickly you are able to pay off the debt the better.

3] Do not use the credit card to buy things you can't afford.

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