Credit can be a powerful thing, but only in a beneficial way if it is managed responsibly. At the start of 2008 the total outstanding balance on credit cards in Australia was $43.25 billion, of which $31billion is accruing interest. According to figures recently release by the Reserve Bank of Australia, Australians spent and average of $17.5billion on credit cards alone in February 2008. This figure exceeds the February 2007 average by a massive $1.9 billion, making credit cards liable for 56% of Australian spending.

This increasing tendency to pay with credit cards has created a competitive marketing environment between institutions, with many providers now seeking to entice their customers with low-rate credit cards.

Low-rate cards offer special incentives such as 0% balance transfer periods and low ongoing interest rates, generally between 9% - 13%.

The Australian Securities and Investments Commission (ASIC) has urged consumers to be wary of terms and conditions on low-credit deals amid fears many Australians will accumulate debts they can't afford. While interest-free purchases and low-interest credit offers are popular, they aren't suitable for everyone so it's important to understand how it works in order to make use of the attractive rates.

Low rates often come attached with other undesired features such as:

Annual fees – Higher fees are principal in low-rate cards. In contrast to standard-rate cards which have no annual fee, or a fee that can be subsidised by reward points, a low-rate card requires the payment of an annual fee. These fees can be more than double that of a standard card. So ask yourself if a lower rate is really worth paying a higher fee when this money could be spent towards paying off your balance?

Rewards program – Reward offers generally come hand-in-hand with a higher annual fee. It's important to remember that nothing is free and that these incentives are expensive for the banks to operate. So unfortunately, in order to keep costs low, low-rate cards will only offer limited partner or discounted programs without the extra benefits of a full rewards program.

Cash advance rate – Banks and institutions see cash advance transactions as a high risk. In effect, this is why low-rate cards charge up to an extra 20% for cash advances than on purchases. So if your aim is to keep debt to a minimum, before selecting your card it's vital to determine whether or not it would be used for cash advances. Otherwise, look for a product that offers low interest rates for cash advances.

Late payment fees – Making a late payment can add a substantial dent to your debt. Like cash advance rates, late fees are generally higher than that of a standard card.

Other fees and charges – ATM fees and overseas transactions can be charged at higher rates.

Limited features – Say goodbye to features such as travel insurance, internet banking, cheque and branch facilities and 24-hour services.

If you struggle to pay off your credit card and revolve your debt from month to month a low-rate card with a low, or no annual fee might be right for you. If you can get a card that offers instant rewards or discounts at places you regularly use, that's even better considering that these features are normally quite limited. Don't be swayed by cards that offer balance transfer period unless you have a good repayment habit.