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7 naughtiest credit card sins to avoid

A credit card on the left and a woman dressed as Satan on the right.
These seven sins must be avoided when using a credit card. (Images: Getty)

There are 15.8 million credit cards in Australia, according to Finder, with a total national debt of $31.3 billion.

That's in a country with an adult population of just 20.5 million.

Considering their ubiquity, the rampant misuse of credit cards frustrates founder Roland Bleyer.

"Better understanding how to get the best out of a credit card can literally save you thousands of dollars in interest and fees and help you to access loads more free offerings, benefits and value-adds," he said.

"Many credit card users have also racked up too much debt through lack of discipline."

This has prompted Bleyer to create seven simple online courses to better educate Australians on the use of credit cards.

The courses cover topics such as card features, debt, usage, applying for a credit card and fraud.

But just for Yahoo Finance readers, Bleyer revealed the seven biggest mistakes he sees Australians make with their plastic:

1. Do not accept the first offer

Banks know that once you have a product with them, you'll be too lazy to leave. So financial institutions will offer whatever sounds alluring to take young customers' credit virginity.

"People accepting the first credit card they get offered from their bank – that's one of the biggest failures of the general population," he said.

"They get so excited... Dishing out to kids a $10,000 [credit limit] on their first low-fee card that charges 20 per cent interest."

2. Never be loyal

"Never be loyal to your bank, because they'll never be loyal to you," said Bleyer.

Yahoo Finance has reported in the past of how financial institutions continue to offer better products to new customers while leaving existing clients on inferior deals.

Credit cards are no different.

For example, he has seen some Australians falsely believe they need to have other accounts – like savings or transaction products – with the same bank to get a good credit card offer.

"You can deal with any bank. I have home loans with whoever's best, I have credit cards with whoever's best, and I have bank accounts with whoever's best."

3. Spend only what you can pay back

Not spending more than you earn sounds obvious, but there are many Australians who rack up huge debts because they use credit cards like it's free money.

But credit cards are one of the worst ways to owe money because of the astronomical interest involved – as high as 20 per cent per annum.

"It's a short term lending device, it was never designed for long-term debt," said Bleyer.

"You should only spend on your credit card when you can afford to pay it back."

4. Don't overspend on reward points cards

Bleyer loves reward points on credit cards.

"Why spend on a credit card if you're not getting something out of it?"

But if you're a person who doesn't pay off the entire amount every bill, the high interest paid easily cancels out any points they accrue.

"If you can't afford to pay it off and you're just doing it for the points, the logic is just not there."

Bleyer told Yahoo Finance that in those cases a two-card strategy might be best.

"If you can't pay it all off, maybe you have one low-rate card that you use for things you know you can't pay off straight away. And you have a separate rewards card that you're paying off [in full] every week or every month, to ensure you're getting the benefit of that."

5. Lower the credit limit and cancel unused cards

Gaining a new credit card can bring many benefits, like balance transfer offers and thousands of frequent flyer points.

But if you're in the habit of applying for new cards regularly, or indeed if you're about to ask for any sort of credit – like a home loan – then you need to reduce your credit footprint.

"The higher your credit limit, the more difficult it will be to obtain other credit," he said.

"I suggest to people to reduce credit limits before applying for more credit."

Many people keep credit cards that they don't use. But they should be cancelled for the same reason.

"They say, 'No, it's okay there's a $20,000 limit but I have no debt on it'. But the bank is still going to run that to $20,000 and factor that in [credit applications]," said Bleyer.

"So for home loan applications where it could be very marginal between approval and decline, it's critical that these credit limits are lowered."

6. Keep up-to-date on changes

Credit card providers, as profit-making businesses, regularly change the benefits and conditions on their products. And not always in favour of the customer.

"Banks are tweaking these products all the time...They take benefits away or change them," said Bleyer.

"You have to be very careful to regularly review your [cards] just to ensure it has the features that you thought it did or it used to have."

7. Use the right card for overseas travel

Many Australians use their credit cards overseas, unaware of the massive fees they pay for such transactions.

"Australians are paying over $1 million per day just in credit card foreign transaction fees," Bleyer said.

"A million bucks just going out the window!"

If you need to use a card overseas, there are products that do not slug foreign transaction fees.

Latitude Financial's 28 Degrees, Bankwest Zero Platinum and ANZ Rewards Travel Adventures are three examples, although they each have features suitable for different circumstances.

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