9 important things you must know about credit cards

Spending on plastic is easy and fun, but it can also be pricey! Before signing up for a credit card, here's what you need to know to keep yourself out of financial hot water.

Interest rates on credit card debt can be as high as 30 percent, so unless you clear your balance every month, go for a leaner, hungrier card.

Read the fine print and ask the lender to explain any details you don't understand before you sign up.

Scores of cards now charge an introductory rate of zero percent for the first six months or so, to attract new customers. Some offer this only on balance transfers, others on new purchases as well.

• Before you sign up, be sure to inquire about the interest rates after the six-month grace period. The introductory rate may suit you now, but the rate thereafter may cause numerous financial problems.
• Don't be afraid to negotiate the rate with the credit card companies. Remember, they want your business.

The APR is the annual percentage rate charged by a company or credit card provider. This is the most important figure for those who don't clear their balances.

• Look out for zero percent introductory charges, but don't pay a rip-off rate when you revert to the standard APR.

APR also refers to the interest rate you pay on money transferred from a previous card, and isn't always the same as the rate for purchases.

• Be warned: a card charging zero percent on balance transfers but a high APR on purchases could use your monthly payment to clear the zero percent balance first, while your spending attracts hefty interest.

Sometimes companies charge APR according to your credit rating, which means you could pay more than the headline rate.

Most credit cards don't charge any interest for around 20 to 30 days after making a purchase. But a handful charge immediately, which means you still pay interest even if you clear your balance every month.

Some cards don't charge an annual fee, others charge as much as $120. Make sure you understand exactly what (if anything) you'll be charged.

Some credit cards offer rewards, such as traveller's points or rebates, on spending amounting to one percent or more. Make sure the benefits of this kind of card outweigh the negatives.

• There is one simple piece of advice with store cards — give them the chop! Unless you know you will clear the monthly balance regularly, cancel them once you have reaped any benefits they might offer.
• Many charge scandalous rates of interest, exploiting their loyal customers with rates of up to 30 percent. Big-name department stores are often among the worst offenders. Shift your outstanding balance to a zero percent introductory offer — if you owe $1,000 on your store cards, you'll save up to $150 over the next six months.

Check on penalties for late payment or exceeding your credit limit.

It's important to build up a positive credit rating by using your credit card carefully and paying off the balance as soon as possible. The easiest way to do this is to know the details of your credit card contract. Avoid the stress of credit card debt and make sure you understand exactly what you're being charged for to get the most out of your credit card.