Unfortunately, the convenience of a credit card also has a cost associated with it. If you don't pay your credit card balances on time, all credit card companies are legally able to then charge the highest possible interest rate without prior notice. Imagine paying anywhere from 15% to 25% APR (Annual Percentage Rate) on your outstanding credit card balance. You will also get charged a hefty $39 late payment fee. Most credit card companies encourage having a large outstanding balance for obvious profit reasons. Once you have a sizable balance on one credit card, other credit card companies will try and lure you into transferring the balance to their card at lower or zero interest for several months. Note: many of these companies charge a 3% transfer fee, and once the promotion period is over, a high interest rate kicks in without prior notice. Credit cards companies only have to give you 45 days notice of an interest rate change after the promotion period..

Make it a habit to always pay your credit card bills on time and do everything to avoid carrying a balance on your credit cards. Pay your credit card bill a few days before the due date to avoid late fees. If you don't have enough money to pay the entire balance, pay at least the minimum amount required on time and pay the remaining balance as soon as possible. If you have problem managing timely payments to your credit card company, consider having an automatic payment setup. This allows the credit card company to automatically charge your checking or savings account to pay for your monthly credit card balance. However, make sure your bank account has enough balance otherwise you get charged fees by both. You don't have to wait for the next statement to make the payment. If you cannot pay your bill in full then explore the option of balance transfer to a new card. Most new cards come with a promotion period of 6 to 9 months during which the interest rates on balances are relatively lower.

So, if you have money saved in a bank account earning much less than 3% after accounting for taxes on interest earned and it is more than your emergency need then you may be better off paying the credit card debt. In some cases, however, a credit card company may offer you no transfer fee if you do a balance transfer on the day you open the credit card account. This could be very beneficial if used carefully. You may also consider transferring the balance to your regular card even if it does not have any balance. In that case, this advance payment on your regular credit card can be used to pay for your future monthly payments while you get to keep the interest on the money you would otherwise be paying monthly on your regular credit card.
With or without a transfer fee, if you have decided to transfer balance to a different card be aware of a few financial penalties.

• If you lose a card, chances are you will not notice it quickly. If it is stolen, you may get a nasty surprise bill. Even if a credit card company goes along with your disputes, your credit history could suffer.
• Keeping track of payments to different credit card companies becomes challenging and any late payment may cost you $39 or more in late payment fees and significant finance charges on the amount.
• Many credit card companies offer you benefits on purchases in the form of points, airline mileage, cash back etc. It is difficult to manage these benefits when you have multiple cards.
• Each time you open a new credit card account, there is an inquiry against your credit history. This happens even when the credit company claims "you are pre-approved". Each such query has a negative impact on your credit score and reduces your ability for future credit.

You can see where all you are spending and help you decide on where you can perhaps cut down. It is important to carefully look at each transaction. Credit card thieves these days use another tactic of charging smaller amounts using stolen credit card information. This may go unnoticed if you aren't careful.

Some cards award airline miles on the purchases you make but that doesn’t mean you can fly any airline at any time to any place. There are a lot of restrictions on them. Others offer cash back either directly to your credit card account or a check to you or in some cases to your retirement account or your child’s college savings account. These paybacks could be monthly, quarterly, or annual depending on credit card companies. Some credit card companies make this reward system even more complex. They will claim a relatively higher rewards with an ‘up to’ clause. Beware of such offers. They use a step system where benefits start at much lower rate for first range of purchases and then they increase. An example could be 0.25% cash back on first $1,000 purchase, 0.50% on next $1,000 purchases etc. Most credit card companies have an annual cap on these benefits. Many people choose the card with less frills even if it has lesser benefits. A $1 now may be better than $1.10 one year later.

Additionally, there may not be any rewards that come along with such purchases. In case of credit card, at the end of monthly billing cycle there is generally a grace period of about 2 weeks for you to make the payment. So, using a debit card may not appear all that appealing to you. But lately, to avoid paying 3% or higher fees to credit card companies, many gas stations will charge you less for gas if you pay via debit card. So consider the benefit of immediate savings on a debit card against benefits of using a credit card on such purchases.
The current Administration is considering allowing superstores to charge less on cash or debit card purchases versus credit card purchases. If this gets implemented, a credit card may look less attractive. With this possibility in mind, it may be a good idea to use a credit card that provides less benefits sooner than potentially more at some point in future.