A look at how credit card companies make money.

Interest charged on outstanding balances
The number one money-maker for credit card companies is interest charged on outstanding balances. Credit cards charge far higher rates of interest than most other types of loans.

Late payment fees.
If you pay your credit card bill late, you can get hit with a penalty fee for late payment.A survey of 140 credit cards this year by Consumer Action found that 85% of the banks raise interest rates after customers pay credit card bills late.

Fees for exceeding your credit limit
If you charge more to your card than the credit card company has allowed, you may find that the charges go through but you get hit with a penalty fee for exceeding your credit limit.

Annual fees
Some credit cards charge an annual fee. They get that money up-front, before you start using the card.

Save Money on Your Credit Cards

Avoid overspending
Because credit card companies make money from people using credit cards, they encourage their customers to spend. For many people, that means that credit cards encourage them to overspend. Overspending means at best that you don't save enough, and at worst that you get into debt.

Here are some ways to do prevent over spending:

1 Keep a running tally in writing of your weekly or monthly spending versus your budget, and update it before each purchase.
2. Limit your credit card use to certain categories of spending. Use your credit card to pay only when there's no risk you will overspend. So use it for regular bills, groceries, and expenses where you trust yourself. For areas where you suspect you overspend or spend on impulse, use cash.

Pay more than the minimum
As much more as you can. At $180 a month, it'll take about four years before you're free of that $6,000 debt. But at $300 a month, you'll be done in two years, if you pay all new purchases in full. To see how long it will take to get out of your credit card hole, use the calculator at bankrate.com.

Saving money by paying off your credit card balance each month.
Pay your credit card bill the day it arrives. That way, you won't forget and you won't rack up interest charges. When the statement comes, don't move it to your "current bills" pile. Get out a stamp and write a check, or take care of it instantly online. Alternatively, arrange to pay the bill automatically from your bank account. Avoid paying by phone; there's often a fee.

Don't own more than one rewards card.
Rewards cards are tricky. If you choose a card with an annual fee and pay interest, it will probably cost you more than the value of the rewards. Airline cards charge higher rates than general-purpose Visas and MasterCards, so they're a bad choice for people who carry balances.

Find one no-annual-fee rewards card. Pay the bill in full each month and the "gifts" will be truly free. Read the fine print, so you'll know which purchases are eligible for points. Unless you're a travel bug, choose a cash-back card, giving you a rebate of, say, 1 percent or more of what you charge. That's a no-hassle payback.

Look for no fee credit cards
Look for no fee credit cards (be sure to consider all the other factors such as grace period, interest rate, etc., as well). Even if you are charged an annual fee, you can may be able to get the fee waived by calling your bank and asking them to remove it.

Consolidate Your Credit Card Bill
Consolidating your credit card bill may save money by reducing your interest and helping you pay the debt off faster. It will definitely simplify your debts because you'll only have one bill to pay.

If you're considering consolidating your credit cards, you have several options. Before you make a decision, carefully consider the costs involved and whether any of these methods will reduce both the total interest paid and your current expenses.

Make money from credit cards
Credit cards offer great rewards for spending money that you would have spent anyway. Rewards are generally tied to how much money you charge to your credit card. Some credit cards offer air miles, other cards offer cash refunds.

Credit card purchases are protected under the Fair Credit Billing Act. This law gives the consumer the right to withold payment for damaged or poor-quality goods purchased with the card. The consumer must attempt to resolve the disagreement with the merchant before asking the credit card company to withold payment.

Be smart about transferring your balance to a bargain-rate card.
When you get the new credit card, drop it into a drawer. Make payments toward your transferred balance each month, but keep shopping with your old card, which now carries no balance. If you pay the bill in full at the end of the month, you'll incur no new interest charges. So wait to switch to the new card until after the bargain period is up, which is typically in six to 12 months. At that point, your card payments will usually get applied to your new purchases first.