CREDIT cards can be a safe and convenient tool for purchasing goods and services, especially over the internet or phone, or an expensive form of credit that can lead to financial ruin.

If you pay off the balance of your credit each month, then your credit card will be a useful tool throughout your life.

To do this I suggest that you only spend on your credit card what you know you will have in the bank when the monthly statement is due. Look at your current bank balance, add on your income less expenses between now and the due date and that is what you have available to pay off your credit card.

You may wish to use a debit card which offers the same convenience of credit cards, but do not provide credit. Typically they draw the funds directly from your bank balance.

If you must use your credit card as a source of credit, you should have a plan of how you are going to pay it back, and as soon as possible.

If you find that month after month you can not pay the monthly balance, credit cards are not for you and you should investigate other options such as debit cards, lay-by and restraint!

Traditionally credit offered by stores has a higher effective interest rate than credit cards or loans.

However, increased competition and the dampening in retail sales from the global financial crisis has led to some stores now offering better credit terms.

Make sure you find out about all the fees before signing up and try to obtain the effective interest rate and compare it to your credit card, personal loan or other source of credit.

If your credit card debt has got out of hand it is best to speak to a financial institution or adviser who may be able to obtain a lower interest rate for you. For example, if you have a mortgage and some equity in your home you may be better off increasing your mortgage to pay of your credit card debt as the interest rate is likely to be less than half.

Paul Blacklow is the president of the Tasmanian branch of the Economic Society of Australia and lecturer in the School of Economics and Finance at the University of Tasmania.