Credit cards can be a remarkably useful financial product when they're used wisely. But they are also responsible for getting plenty of Australians deep in hock.

There's no doubt credit cards can be handy in emergencies, and if you're travelling overseas they're a lot safer than carrying cash in your wallet.

The overwhelming problem with credit cards is that many of us have come to regard the limit on our card - rather than the balance of our bank account - as our spending limit. When that happens, credit cards can be a one-way ticket to overspending.

Part of the problem lies in the way credit cards are structured. They are a 'revolving line of credit', meaning you can borrow up to the card limit, repay all or part of the debt and then redraw the credit again, with the cycle repeating indefinitely.

It's a system that can work well if you pay off the card balance in full each month. Cardholders who do this are known in banking parlance as 'transactors', and they enjoy the convenience of credit cards without the burden of interest charges.

Another type of cardholder, termed a 'revolver', carries a card debt from month to month. These are card issuer's favourite customers because with card interest rates as high as 20%p.a., revolvers can pay a small fortune in interest.

Interest costs are at their highest when you stick to the card issuer's minimum monthly repayments. And even on a relatively small card balance the interest can escalate enormously.

Let's say for example that you owe $3,000 on your card - the equivalent of the current average balance. If you only make the minimum repayments, set at 2% of the outstanding balance, at an interest rate of 15%p.a. it will take you over 36 years to clear the card debt.

By that time you'll have paid almost $4,500 in total interest - and this assumes no additional purchases are made on the card!

It works this way because interest is building at a faster rate than you're paying off the outstanding debt.

The only way to turn the situation around is to pay more than the minimum. Even small additional amounts can make a significant dent in the interest bill.

Now, while rising rates on home loans are often blamed for getting us into financial strife, I reckon credit cards can be far more troublesome, especially for those tarred with the 'born to shop' brush.

Yes, it can be tough meeting higher mortgage repayments, but at least our homes increase in value over time. Try saying that about most card purchases, which are typically 'here today, gone tomorrow' items leaving cardholders with little more than a legacy of high interest debt.

If you must use a credit card, and you're likely to have an ongoing card debt, aim for one with a low rate.

Better still, think about a debit card which lets you use your own money rather than adding to your personal debt.

Most importantly, never regard a credit card as the equivalent of cash in your pocket - it isn't.