In today's fast-paced world, more and more people depend on credit and do not even bother setting a monthly budget. Why bother saving, they ask, when they have the luxury of a hassle-free alternative form of payment that makes buying anything, anytime, a breeze. Well, sure credit cards make shopping easier, but they certainly don't make it hassle-free.

Ask a child what a credit card is, and he or she may tell you it's a piece of plastic in your wallet that gives you "free money". Of course, there's a lot more to it than that. This little piece of plastic wields a great deal of power over the vast majority of people in our society. It's a compressed form of buying power that allows users to borrow money from a bank or financial institution in order to make on-the-spot purchases. Credit cards make buying easy. The hard part is paying the money back before the interest starts to compound.

To obtain a credit card, you must first submit an application form that serves as an agreement between you, the credit card consumer, and the credit supplier. If you application is approved you will receive a credit card. The card enables you to make purchases or access cash, as if you are borrowing the money from the credit supplier. There is a pre-determined spending limit applied to your account, and the supplier may limit the amount you can spend on a monthly basis.

On the back of this small plastic card is a magnetic strip encrypted with electronically encoded security information. When you make a credit card purchase, the retailer will access the information contained within the magnetic strip in order to authorize payment. Most major credit cards can be used virtually anywhere for all kinds of purchases, at retail outlets, over the phone and on the Internet. Where you can use the card depends on each individual merchant's capability to accept this type of payment. Many retailers also offer the option of making payments toward your credit account. Credit cards can also be used to withdraw cash from ATM cash machines.

There are many credit card suppliers, but seven of them represent the bulk of the industry. VISA and MasterCard are the two dominant players, as well as American Express, Citi, Discover, Diners Club, and JCB. Don't be fooled by the fact that many banks or other organizations arrange partnerships with the big credit card suppliers to create branded cards that have the logo of both companies.

Going to a traditional retail store and making a purchase will require you to "swipe" your card through the slider on the side of the small machine at the check out register. The store clerk will handle the rest. Buying goods on a web site means you will need to type in your credit card details on the site itself. Make sure the site you are visiting has a secure "lock" image in the bottom right corner of your browser. This indicates the site is a secure place to purchase. You will get a receipt for this purchase from the web site, and also a mailed bill from your credit card supplier with your monthly statement. You can choose to pay your bill off in full, taking your balance down to zero, and you will not be charged interest.

Some people choose to make only a partial payment, in other words, not paying off the full amount of their purchases made during the previous month. If you do that, you will be charged interest. And interest generally is applied retroactively to the day you made the purchase. If you make several purchases, or buy things that are expensive, the interest can add up surprisingly fast. This is how the card companies earn their revenues. They also sometimes charge late fees if you fail to pay some or all of your bill by the due date.

There are definitely convenience factors attached to carrying a credit card. However, the convenience must be balanced against the high interest rates, and potential for making purchases we do not really need, but rather merely desire in the heat of the moment. The best advice is to pay your monthly card bill off in full every month, even if it is hard to do. Thus you will have all the convenience of using the card, without the pain of the high interest rates.