Credit cards. Nowadays, credit cards can be used for just about anything. And they are ridiculously convenient. Shopping for groceries? Simply tap the terminal and away you go. Ordering food or transport? Load your credit card details once and payment is automatic. Buying online? Never been easier. Fill in a few fields and the computer will even remember your details for next time.

If you use credit cards well, they can make your life much easier. If nothing else, once a month you get a full list of all the items that you’ve purchased. This list can be downloaded electronically and loaded into budgeting or accounting software, taking the time and hassle out of financial record-keeping.

Broadly speaking, there are two ways to use credit cards. The first is for convenience. People who use credit cards for convenience never pay interest on the card. They always pay the amount owed in full and on time – usually by direct debit on or before the due date each month. In the trade, people like this are known as ‘transactors.’ As that name suggests, transactors use a credit cards to make transactions easier. And more power to them.

The other way to use credit cards is to buy things for which you don’t currently have the money. People who do this have a challenge: either they find the funds between the time of purchase and the due date for paying off the card, or they incur interest. And the interest can be substantial. Indeed, it is not unheard of for the interest rate on a credit card to approach 20% per annum.

Basically, people who use credit cards like this are using tomorrow’s income for today’s spending. In the trade, these people are known as ‘revolvers.’

As financial advisors, you can probably guess how we think credit cards should be used. Transactors only need apply. Being a revolver is very risky: if, for some reason, you can’t come up with the money required to pay off your credit card each month, everything you purchase is automatically (say) 20% more expensive. This interest can compound over time – it would only take 3 ½ years for a debt that is growing at 20% per annum to double in value.

Think about that. It is the opposite of good buying. It’s as if you’ve gone into a shop and said to the shop assistant “please add 20% to the price of everything.” Call it a reverse bargain. Whatever you call it, it’s bad buying.

If you are a revolver, and especially if you are struggling to pay off your credit card balance each month, you need to take action. Talk to us: there are simple steps you can take the put you back in control of your finances and will help you make sure that you never pay more than full price again.