Many people pile up too much credit card debt because they don't understand how credit cards actually work. Credit cards are a way of borrowing money. When you sign up for a credit card, the bank (or other institution) that issues the card promises to lend you money, up to a certain amount, under certain terms and conditions. You agree to pay it back, at a specified rate of interest.

However, it's easy to overlook how quickly interest can accumulate, and how much it can add to your overall debt--and obviously, the longer you take to pay it off, the more you'll pay in total.

One of the first facts you should check, when applying for a credit card, is the annual percentage rate (APR). This is the rate of interest you'll pay. Some cards will offer you a 0% APR (no interest at all) for a short introductory period. However, be aware that after the initial period is over, your APR can increase substantially. Find out whether your APR will be fixed or variable.

Other fees and charges may apply, especially if you're late with your payments. Find out details about late fees and charges.

What's the best way to use a credit card?

• Don't regard your line of credit as additional money. If you cannot afford to buy an item with cash, you probably shouldn't consider buying it with a credit card.
• Pay off the balance in full each month. Try to avoid just making the minimum payment.
• Don't use your credit card to finance long-term debts. If you need to go into debt for a larger purchase, apply for a bank loan. It will usually be much less expensive in the long run.