Frequently, I get asked how many credit cards are ideal.

Many financial advisers would emphatically state that the best number of credit cards is zero. Personally, I wouldn’t go that far.

I believe that one credit card is a useful addition to your financial portfolio, provided you are able to use it wisely and with the necessary level of caution.

My key rules for using a credit card are as follows:

• Make any bigger or planned purchases early in the month so you can enjoy the longest possible period of interest-free credit on your card.
• Ensure that you pay off the entire amount owing on the card the following month so you do not incur interest costs.
• Make your monthly credit card payment by direct debit or automatic payment so you do not accidentally miss it and incur further interest costs or a penalty payment.
• If you already have multiple cards with money owing on each of them and the interest costs are building up, there are some steps you can take to help improve your position: 
  1. Ensure you meet the minimum monthly payment on each one of your credit cards.
  2. Pay off your credit cards in order, with the highest interest rate first, then the next highest, and so on.
  3. Keep one card to use but cut up all the others immediately to ensure you can’t use them and incur more debt – even if you’re tempted to do so.
  4. If you are able, you should look at consolidating your debts with a bank or finance company to bring together all of your credit card debts with one lender at a cheaper interest rate. Set up regular weekly or monthly payments to pay off the debt as quickly as possible. One popular approach is to increase mortgage borrowings (if you have a residential mortgage) so your borrowings are at the cheapest interest rate possible (say, 9 per cent) and then pay off your credit card debts (which were previously at, say, 20 per cent), thereby saving yourself many hundreds or thousands of dollars in interest costs. If you don’t feel confident doing this yourself, talk to your bank or an independent budget adviser. You can find an adviser at www.familybudgeting.org.nz.