Five ways to make the most of your credit card

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More than 15.8 million credit cards are in use across Australia, and they remain a popular payment tool. We reach for a credit card for one in four payments, a figure that rises to one in three among high income earners, who are the dominant users.

With a few smart strategies, cards can be a handy tool to get more from your money.

Here are three ideas for getting started, plus the traps to avoid.

how to make the most of your credit card

Use your credit card to manage cashflow

If you're working in the gig economy or are self-employed, chances are your income differs from week to week.

One way to manage cashflow and avoid late payment charges is to pay all monthly bills with a credit card, allowing your pay to accumulate. At the end of each month, use the pooled income to pay off the card in full.

Use it as a short-term loan

Unexpected bills inevitably crop up.

Maybe the car needs a new muffler or the family pooch just notched up a crazy-high vet bill.

A credit card allows you to meet emergency expenses without the need to wear additional costs, such as application fees on a personal loan.

Earn a bunch of freebies

If you have the discipline to maintain a zero card balance each month, a rewards-based credit card can help you squeeze extra value from spending.

Be warned, though. The comparison site Mozo says the average interest rate on rewards cards is 20.21%, so you need to be absolutely sure about avoiding a debt.

Rewards cards can also come with annual fees high enough to bring on nosebleeds. The Qantas Premier Titanium card, for instance, gives new cardholders 150,000 Qantas points (with a spend of $5000 in three months). For context, a one-way flight from Sydney to Fiji requires 14,400 points. So, the Titanium card could provide a family with a free vacation. The catch is the $1200 annual fee.

A more reasonable money saver can be MoneyMe's digital credit card offering discounts of up to 40% on purchases at more than 1700 partner stores, including Woolworths, Chemist Warehouse and Target. Along with interest as high as 23.74%, the MoneyMe card charges a $5 monthly fee if more than $20 is owing on the card - a good incentive to maintain a zero balance.

Choose the right credit card

Australians owe $33 billion on personal credit cards. About half of this balance is accruing interest, which suggests many users pay off the balance within the interest-free period.

Even so, with the average card purchase rate sitting at 17.09%, cardholders who carry an ongoing balance are collectively paying almost $8 million in daily interest.

If you're unlikely to pay off the card in full each month, forget the rewards and look for a low-rate card. This is an area where the mutuals - customer-owned banks and credit unions - offer red-hot deals.

G&C Mutual Bank's Low Rate Visa has a purchase rate of just 7.49%. Community First Bank, Illawarra Credit Union and MOVE Bank all have credit cards with a rate of 8.99%. Defence Bank's Foundation Credit Card has a six-month introductory rate of 3.99% followed by an ongoing rate of 8.99%. (These were the rates at the time of writing.)

If you hold other products with a card issuer, you may be eligible for a low credit card rate. P&N Bank, for example, offers a card rate of 7.02% for select home loan customers.

Switch to an interest-free card

If you're happy to stick with a low credit limit, the new breed of 'interest-free' credit cards can help you save even if you have ongoing card debt. These cards aren't entirely free, as a flat monthly fee is charged. But it is possible to skip this cost altogether.

Community First Bank's n0w credit card offers a choice of three credit limits - $1000, $2000 or $3000 -with a corresponding monthly fee of $9, $14 or $19 respectively.

On a balance of $3000, for instance, you can expect to pay fees totalling $228 (12 monthly fees of $19), equal to a rate of 7.6%. The monthly fee is waived if your account has a $0 balance and you haven't used the card for the entire calendar month.

The major banks also offer interest-free cards, though the monthly fee can be higher. CommBank's NEO credit card has a monthly fee of $22 on a $3000 limit. NAB's StraightUp credit card is slightly cheaper, with monthly fees of $10, $15 and $20 on balances of $1000, $2000 and $3000 respectively.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.