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.

Credit cards might seem like the pot at the end of the rainbow to small kids, but in reality, they are more like tiny bankers in our pockets. We are tapping into a loan with each purchase, and while that allows us to make impulse buys (not a good idea most of the time), it also makes it easy for the "banker" to charge us interest. The short-term benefits of having the credit have long term consequences of paying off the "loan" before compounding interest kicks in and starts hurting.

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.

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 seven main credit card organizations that operate in countries around the world. VISA, American Express, MasterCard, Citi, Diners Club, Discover and JCB. The most widely used and universally accepted cards are MasterCard and VISA. Some credit card suppliers will partner with particular retailers and organizations to issue credit cards on their behalf; for example, the HSBC VISA card.

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.

Credit cards are convenient and useful for today's shopping environment. However, the ease of use can seem pretty small compared to the huge pain of paying off debts owed on credit cards. Interest rates are usually very high. So try to pay your balance off in full every month. You will gain the convenience, without the pain. There is nothing wrong with using cash for most purchases, either, so don't feel that a credit card is mandatory.