Credit cards: the type of card you use says a lot about you and may prompt you to change it

CREDIT cards are like clothes — not all types suit all bearers. Work out the right card for your lifestyle and you will be better off.

YOUR credit card says plenty about your lifestyle, money habits and your potential to sink into painful debt.

Fresh Reserve Bank data shows that Australians are paying interest on two-thirds of the nation’s $51 billion of credit card debt. Understanding what type of credit card user you are can help prevent problems and give you greater control.

Nine out of 10 Aussie adults have a credit card, and we’ve broken them down into a few key personalities. See which one best matches you and discover what needs to be done.

THE JUGGLER

It’s a handy skill if you’re a clown, but if you are constantly juggling debts and repayments between several credit cards you are heading down a dark path.

Interest rates near 20 per cent can be crippling and dramatically increase the cost of each purchase, and one small error could lead to late payment fees and other penalties.

A solution may be to focus on paying off one card first, then getting rid of it. Also consider a low-interest debt consolidation loan, and cancel one or more of your cards.

Revolvers extend the time frame for paying off their card.

THE REVOLVER

Closely related to the juggler, the revolver does not repay the closing balance off their card each month. About a quarter of cardholders share this personality, which pays a big chunk of the nation’s $5.5 billion-plus annual credit card interest bill.

“By making only the minimum payment or slightly more each month, revolvers extend the time frame for paying off their card,” says People’s Choice Credit Union CEO Steve Laidlaw.

“For these users, the lower interest rate and scheduled repayments of a personal loan might be a better way of managing their debt.”

THE SWITCHER

Zero-interest balance transfer credit cards have boomed in recent years, enticing customers to switch to cards that offer a six or 12 month interest-free honeymoon rate. Switchers move their debt to a new balance transfer card just before the honeymoon expires, but risk giving themselves a poor credit score that can affect future loans.

“Have a think about the effect multiple credit card applications might be having on your credit score, and make sure you’re absolutely clear on the interest rates, fees and date that it reverts back to the standard terms — the honeymoon doesn’t last forever,” Laidlaw says.

THE POINTS COLLECTOR

These people love to chase rewards points, usually of the frequent flyer variety, and a majority pay off their card balance every month. Canstar research has found that about 42 per cent of people are looking for a rewards program, but spokeswoman Justine Davies says they typically come at a high cost.

“The average interest rate on a rewards card is just shy of 20 per cent, and annual fees average around $120 although they can easily be up to $700,” she says.

“With those costs, someone who does not spend a lot on their card and who does not pay it off religiously each month is unlikely to get much benefit from those rewards.”

About 42 per cent of people are looking for a rewards program.

THE BIG SPENDER

If you spend more than $5000 a month on your card you fall into this category along with one in five other Aussies, and managing your debt becomes more important because of the large numbers involved. Failing to pay just one monthly spend can add an extra $1000 hit to your annual household budget.

Davies says many big spenders chase rewards points, but also need to focus on card fees and benefits. “Check whether your rewards card caps the amount of points you can earn.”

Don’t put fashion before fees and interest rates on your credit card. Picture. Andrew Tauber

THE FASHIONISTA

Also known as the trendsetter, it’s all about getting the latest and greatest. However, choosing fashion and features over fees and interest can be costly.

Canstar says more than half of card hunters seek platinum or gold cards. “Be honest about what type of credit card user you are,” Davies says. “Be aware that rewards and shiny colours come at a price premium because of the extra benefits they offer. If you carry an ongoing balance, though, the interest you pay may well outweigh the benefits.”