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Using credit cards can become very dangerous as they give the illusion that you have money to spend, when in fact you may not.

According to the latest RBA figures, the current national credit card debt is $49 billion (as of March 2014) and is set to reach more than $52 billion by December 2014, according to creditcardfinder.com.au.

Before you decide to apply for a credit card, you need to seriously think about the impact it could have on your finances and whether you actually need one. But if you already have a credit card, here is what you should avoid:

Miss repayment deadlines

This is a big no-no. Missing a repayment due date will not only mean you will have to repay extra in late fees, but depending on the amount and how late you are, the default could appear on your credit report.

With changes to the credit reporting system, now credit providers will be able to see the past 24 months of your repayment history and if your history is not squeaky clean, it could affect your borrowing power if you apply for credit in the future.

Make minimum repayments

The minimum repayment amount that the financial institution charges cover the interest owing and only a small percentage of the amount you borrowed. So, if you are only making minimum repayments, it will take you a long time to pay off the credit card. According to recent research by Mozo, credit cards that have a few thousand dollars owing with high interest rates will take over 100 years to pay off if only the minimum repayments are being made. Even if you are able to contribute an extra $10, it will help.

Withdraw at ATMs

Withdrawing money using your credit card can be extremely expensive because not only will you have to pay cash advance charges, but you will also be charged interest on the amount owing.

It is important that you budget and plan your spending so you are not put in the situation where you have to use your credit card for a cash advance.

Applying for a credit card because of the rewards

Credit card companies often market special deals to draw people in and sign up for their product. Although these offers may sounds great, the long term costs of owning a credit card usually outweigh the initial benefits.

This is also the same for store cards. Some retailers may offer credit cards with no deposit and an interest free period so you buy now, pay later. However, these cards often have notoriously high interest rates, so if you don’t pay off the amount owing before the interest free period ends, you could end up paying a significant amount of extra money in interest.   

Have multiple credit cards

Having multiple credit cards can be a dangerous game as you could end up paying an excessive amount in interest.

Multiple credit cards can also affect your borrowing power if you want to apply for a home loan. When a lender assesses your application, they will look at the credit card limit, not the amount owing. So, if you have multiple credit cards all with large limits, this could affect what type of loan you can get or even if you will be approved.

Ignore statements

It is important to regularly check your credit card statement so you know how much you owe. Not only will this stop you from overspending on the plastic, but you will also be able to quickly identify any mistakes or incorrect purchases. There are plenty of credit card scammers out there and if you are not keeping track of your spending, you may fall victim to a scam without even knowing it.