Credit cards are not your friends. They cannot hold you when you are feeling down or make the cobwebs in your head go away after partying all night.

You have extremely poor credit if you have been overspending for a long time and your outstanding loan balances exceed your income.

Your credit worthiness determines whether a mortgagor approves your loan application to purchase a home, or if a car dealer will finance your auto purchase.

In other words, it makes or breaks you.

For consumers tempted to resort to shiny plastic cards to bail themselves out, here's a warning: Credit-card usage represents high-interest loans, which grow exponentially if you become delinquent or you make the minimum payments each month. Interest is charged at 45 per cent and more.

So, cut up those credit cards! Keep one for emergencies only.

You are in danger if you have no home insurance but you own a few pairs of Ferragamo shoes and a few Palamo Picasso accessories, or have club membership in the High Flyers in Business club.

Think about your priorities. If someone in your family were to have a medical emergency, would you have adequate health insurance to cushion the blow? What about your pension contributions? Are you simply putting in the minimum amount?

Ideally, the experts say each income earner in the family should save at least 10 per cent of gross income.

The younger you are when you begin, the more secure you are likely to become at age 65.

If you are 30 years old and were to save 10 per cent of a $500,000 annual income in your pension scheme, or $50,000 every year, and earn a rate of return of 8.0 per cent, that money would grow to more than $900,000 by age 65.

If you are one of those persons who pay only the minimum amount due on your credit card each month, or if you send in only a small contribution towards the principal balance, then you are most likely in over your head.

Ideally, you should only charge what you can pay off at the end of each month.

When you can't afford to pay off the balance in its entirety, it is time to cut up those cards and approach the amount like a major loan.

Make every effort to pay some money towards the outstanding principal.

For 2009, paying off all credit-card balances as soon as possible cannot be understated. A person with $5,000 in credit-card debt that makes the minimum payment of just $200 per month will end up spending more than $8,000 and will take almost 13 years to pay off that debt.

Buying on credit and paying by instalment has become an adopted way of life for Jamaicans.

Buying a new flat-screen TV to impress your friends is usually easier before the reality of the true price in monthly instalments hits. What's an extra $3,000 per month?

The problem is that all of these bills start to add up and your monthly income ends up being zero.

If your monthly income is all spent by the 25th of each month - in slicing and dicing to pay for dozens of unnecessary purchases and services, it is likely you are in over your head.

Check the luxuries and cut up the ones you can live without.

Some of the best places to find savings include your telephone bills - mobile and landline; your utility bills - turn off the lights, and don't run the air conditioning if no one is home; and entertainment expenses - eat out less, pack lunch for work.

We are burying our heads in the sand if we hide the truth from our families. Take stock of your financial status daily.

Have a family meeting each week or monthly. Check the danger signs and take evasive action. Get a good assessment of where you are and how to get out. In the meantime, cut up those credit cards. They can save face today, but drag you down the financial hole tomorrow.

Submitted by Dorothy Campbell of the Consumer Affairs Commission.