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.

Children often say that credit cards are a source of free money. It's charming, but we know better. For a tiny piece of plastic, the credit card sure wields a lot of power over most people in industrialized societies. It acts like a tiny bank loan in our pockets, and allows people to make impulse purchases without having the cash in hand. It makes buying a lot easier in the short term. Of course, the hard part involves paying back the "loan" before the interest begins compounding.

Today it is easier than ever to get approved for a credit card application. Most card suppliers continually mail advertisements and application forms to households. After mailing in the application, most people will receive a card in the mail in a short time. There will likely be a fairly conservative spending limit placed on the card at the beginning, though this can rise over time. You will be able to purchase goods or access cash from the supplier's "bank" up to your monthly spending limit.

The flipside of the plastic card has a magnetic strip which is encrypted with coded security and demographic information. The information held in the strip is transferred during a transaction to the retailer's machine to allow it to communicate with the card supplier and authorize your payment. Millions of retailers accept credit cards. You can also use the card for purchases over the telephone or on the Internet, depending on the merchant's ability to accept payment of this kind. Finally, credit cards can also be used at ATM cash machines to withdraw cash from your credit card account.

Around the world, there are seven major credit card operators. Mastercard, VISA, Citi, American Express, Diners Club, JCB, and Discover. Of these, VISA and Mastercard are the most widely accepted and largest companies. Some banks or other companies will form a partnership with a particular card supplier, and use them exclusively.

When you make a credit purchase at a retail store or service outlet, the card is swiped into a special processing machine that retrieves your account data. If you buy online, you will be asked to enter your credit details over the merchant's website. Online shopping can be dangerous, so make sure that the site is secure before sending your credit information over the Internet. When the purchase has been approved, the credit card supplier will send you a bill for the amount spent. You are required to pay the full amount, or send partial payment. If you pay in full, the credit card supplier won't charge interest.

Of course, some customers make only a partial payment on their monthly bill, instead of paying the full amount. They are then charged interest, and the interest is retroactively charged back to the date of the original purchase. With several purchases, or a few expensive items, interest rates can build very quickly. Credit card suppliers charge high interest rates, as this is how they generate their revenues. If you pay your bill late, you may also face late fees.

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.