Credit cards are designed for convenience and can be a useful financial tool if used properly. However, credit cards can also lead you down a path of costly debt that end up costing you more than you realise. See below for credit card traps that you should avoid:

1. Minimum repayments
When making repayments you may feel the need to just cover the minimum repayment which will vary from 1% to 3% of your total balance. Whilst you may feel on the right track, overtime the balancing remaining will accrue interest and end up costing a lot more in the long run. Hence ideally you would want to pay your credit bill in full, or at least the maximum you can afford to pay to reduce your overall interest costs.

2. Cash advances
Using your card to make a cash advance can be expensive as they can accrue a much higher rate of interest straight away (from 22% to 30%) with additional fees. To avoid this, use your debit card for ATM withdrawals or a credit card issued by a credit union.

3. Rewards and points
Credit cards with a reward program may often entice the cardholder through free flights or cash back every time you spend. Some people end up spending more on their credit cards than otherwise to chase for rewards or bonus points. However, often these cards will also come with higher interest rates.The interest you accumulate may easily outweigh the rewards you earn.

4. Interest free periods
There are a lot of credit card providers that offer interest-free or very low interest rate periods. This period will often last up to 12 months before they rise to normal interest rates or interest rates as high as 30%. Hence always read the fine print when entering such deals to prevent yourself from falling into this trap.

Struggling to meet credit card repayments is a problem faced by many Australians. If you need credit card debt help and advice, or think you have reached the stage where a formal debt solution (such as filing for bankruptcy) is required, call the insolvency experts at Debt Free Australia on 1800 462 767.