During the last ten years, Americans have fully embraced the idea of using credit cards to make purchases. In fact, the average American household owes nearly $10,000 in credit card debt. As a result, the credit card companies are reaping record profits. These profits will undoubtedly increase with the passing of recent legislation reforming Federal bankruptcy law, which will make it harder for the average debtor to file for bankruptcy. One of the reasons that the credit card industry is so profitable is that so many of their customers fail to use their credit cards wisely.

Anyone with good credit can easily obtain a major credit card that has a favorable interest rate of 10% or less. In order to keep that low rate, all the cardholder has to do is pay their bills on time. Many customers fail to do so, however, and that can lead to late fees that range from $15 to $29. Even worse, paying late can cause the credit card company to raise the interest rate on the account. A single late payment could cause the interest rate to increase substantially, and there are many credit card holders who now pay interest rates of as high as 30% per year.

Interest rates that exceed 20% make it quite difficult for anyone carrying a balance to pay off their bill in full, so this is something that is best avoided, if possible. Should you pay your bill late once and receive a late fee, it may be worthwhile to call your credit card company and request that they waive the fee. Most credit card companies will waive a late fee - one time only. Some companies may refuse to do it at all, but it's worth the cardholder's time to ask, just the same. Should your credit card company refuse your request, it may be worth your while to shop around for another card.

It is often possible to save money by transferring a credit card balance to another card with a lower interest rate. Fierce competition in the credit card industry has led to a flurry of advertising where customers routinely receive offers in the mail for low interest cards with great promotional offers. It is not unusual to receive an offer in the mail for a card with a temporary rate of less than 5% if you transfer your existing balance to the new card.

Be aware that these low rates often apply to transferred balances only, and may not apply to new charges. Also be aware that these promotional rates are usually limited in time; typically the limit is six months or less. Higher rates may apply to existing balances after that time period expires, and the new, higher rates may even be applied retroactively. Cardholders are advised to carefully read the fine print in the cardholder agreement.

A few good tips for reducing credit card costs are:

• Take the time to shop around in order to find a card with the lowest possible interest rate.

• Always make your payments on time. An easy way to do this is to pay on the Internet. This eliminates the possibility of a check being lost or delayed in the mail.

• Move balances from high-interest accounts to low-interest accounts. Keep a sharp eye out for cards with low promotional interest rates and transfer your balances to those accounts.

• Use your credit cards carefully. If it is possible to pay cash, then pay cash.

• Always pay your balance in full, if you can.

• Try not to take cash advances unless you must; the fees and interest on a credit card loan can be high

These simple steps will help you keep the sometimes considerable costs of owning a credit card to a bare minimum.