CREDIT cards could be the best way to cope with the financial demands of the coming months, but there can be a high price to pay for the ease and convenience of their use. With the recent batch of new promotions and extra benefits, it is more enticing than ever to use plastic instead of cash or cheques. By carefully managing your finances and taking advantage of the other services available from banks, you can save thousands of dollars on interest payments. The combination of cold weather, Christmas and Lunar New Year, makes the winter months a prime time for credit card use in Hong Kong. Competition between the banks is fierce and each autumn brings new launches, such as the air miles promotions launched last year. Incentives to shop and save by using credit cards cover bonus point schemes which can now be used for goods and air miles and refunds on credit card fees. Price protection was introduced for all Standard Chartered credit cardholders in September. This new benefit guarantees to repay the difference if one buys an item with a Standard Chartered credit card and subsequently find an identical model on sale elsewhere at a lower price. 'The response has been quite overwhelming,' said Bonnie Cheng, senior product manager of Standard Chartered Bank. Although Ms Cheng was not able to reveal the number of new credit card customers attracted by the benefit or give details of the number of claims, she said cardholders had successfully claimed sums from a few hundred to more than a thousand dollars. Electrical appliances, clothes and watches have been the main purchases claimed for so far, Ms Cheng said. To claim a refund, customers must complete a form stating where they have seen the goods on sale at a lower price and submit it to Standard Chartered with the original receipt. 'We have to verify whether it is exactly the same model and colour,' said Ms Cheng, adding that goods in a sale do not count. The shop where the cheaper version has been found must also accept credit cards. If Standard Chartered takes the prize for innovation, Hongkong Bank believes it offers the most bells and whistles. Its air miles bonus points programme was extended at the beginning of November. Bonus points can now to be used to buy heavily discounted goods from cars to food and travel with United Airlines and Lufthansa. 'The ordinary man in the street wasn't getting as much benefit as the big spender with air miles,' said Richard Cromwell, senior manager of the card products division of Hongkong Bank. 'Bonus points affect everybody,' he said. Hongkong Bank is now awarding one point for every $8 spent on its credit cards, once the first $8,000 dollars has been spent for the first 1,000 points. Each customers' accumulated bonus points are included on the credit card statement and customers must notify the bank (telephone banking services can be used) if they would like the bonus points to be put towards air miles, discounted goods or the credit card's annual fee. If the points are not transferred within 12 months, they become invalid. 'To get a trip to Singapore you need to spend just under a quarter of a million Hong Kong dollars,' said Mr Cromwell. In spite of the shop and save promotions and the undeniable convenience of credit cards, there is a high price to be paid in interest payments. Most banks charge two per cent a month on outstanding balances and 2.5 per cent for cash advances. Over a year, this is the equivalent of between 27 and 28 per cent. Banks argue that credit cards require a high level of servicing, such as liaison with retailers, and that there is a higher risk of fraud and default than with other types of credit. Fortunately for them, there is a large pool of customers who stay in debt for long periods, making regular interest payments, so credit cards are a profitable line of business. But the cost of credit card interest payments can be more than halved by using an overdraft or other short-term loan facility. Using the secured Credit Facility available through the Hongkong Bank's Power Vantage account, for example, interest is charged at the bank's 'Best Lending Rate', currently 8.5 per cent, plus 1.5 per cent, giving a rate of 10 per cent. Unsecured lending through the Power Vantage Clean Credit Facility repayment options is similar to a credit card repayment structure, because one only has to pay a minimum of five per cent of the outstanding amount each month under the Clean Credit Facility. On $10,000 worth of credit, the interest savings over a year could be over $1,000.