Credits cards are a convenience, not a crutch.

Credit cards are a great way to make purchases and record to the penny your spending. They also provide a way to postpone payment on items and thereby earn more interest on your money.

For example, if you have a money market account that gives you 5% annual interest and you spend $1000 a month through your credit card, you can keep that $1000 in your money market account for an additional month. At the end of a year you would have earned an additional $51.16 for doing nothing.

Now $51 may not be much but it's free!

Also you can use your credit card statements to keep track of exactly how much you are spending and where your money goes. With some credit cards you can use personal finance software to download your credit card transactions from the Internet right to your home computer.

Credit cards may actually save you money. Some people avoid making purchases if they do not have cash. Cash seems to "burn a hole" in our pockets, it just disappears. It is so easy to spend and it is right there. But a credit card takes more effort and you know that you have to pay the bill later that month.

Your credit card may also offer a rewards program where you get cash back, frequent flyer miles or discounts on services and merchandise.

Credit cards are convenient. Some purchases, especially those on the Internet, will only accept credit card payment. Also you don't have to continually go to the bank or ATM to get cash.

A credit card also provides a measure of safety. You don't have to carry large amounts of cash for large purchases. Even if your card or credit card number is stolen, you are not responsible for the thief's use of your card.

But credit cards can also be a crutch. Too many people see their credit limit not as the maximum amount of debt they can go into, but as an account full of money that they can spend.

Average household consumer credit balances have now topped $7000. The monthly interest charge for a credit card charging 18% interest is over $100. More than $1200 a year just in interest.

And this interest is not like home mortgage interest that you can deduct from your taxes. You are paying an additional 15-36% on top of the $1200 for taxes on the interest you are charged. That brings your interest charge total up to $1400-1600 each year. Even more if your balance or interest rate is higher.

What is silly is that many people who are paying 18% interest rates on credit are also investing in a stock market that only averages 11%. Or worse, keeping money in money market, savings accounts or CDs that only pay .5-3%.

Want an investment that returns over 20%? Invest in paying down your debts. In the above example you can save over 20% with taxes factored in.

Many people have developed the habit of using their credit cards to buy what they want now and paying for it later. They then make only the minimum payments required. Often the minimum payment is set so that you only pay the monthly finance charge (interest) or just a small amount above it.

This will keep people paying that 18% rate for years. A $1000 purchase can end up costing $1500 when paid off after 5 years. Ironically many of these same people will wait months for a sale so that the item's price goes down 10-20% and then make a purchase on their credit card and end up giving the savings to the credit card company instead.

Sometimes the credit card can lead a person into living a lifestyle that is beyond their means. If a person gets in the habit of dining out two to three times a week and these meals are paid for by credit card, the card balance increases quickly. Often the additional expense was not planned or budgeted. People can even end up spending more each month than the actually earn.

This can continue as long as the credit card balance is below the limit and the person makes their regular monthly payments. But as soon as the credit limit is reached, many credit companies will increase the credit limit and give the person more room to get into debt. I have personally seen a credit card limit expanded by $10,000 within three months.

This cycle can continue until the person is required to make a minimum payment that is more than they can afford. Now not only do they have to cut back on the lifestyle they have grown accustomed to over the years, but they also have to either increase their income or cut out things they enjoyed before increasing their lifestyle with their credit card.

Also what happens if the person is suddenly out of work or has to take a pay cut or lower paying job. That's right, the credit card bills keep coming. And many people rely on the remainder of their credit limit to supplement their income until they are working again or can find a better paying job.

We have seen this cycle in America increase average credit card balances each year and eat up the equity in many people's homes. Home equity loans are used as credit cards to live a lifestyle that is beyond people's means. Or to purchase toys they really can't afford to buy let alone keep and use.

Or the home equity money is used to "pay off high interest credit card debt" as the ads suggest. But then people continue the habit of living off their credit cards and get right back into debt again.

So what is the answer to America's growing debt problem? Abolish credit cards? Nationally imposed credit limits?

How about a little old fashioned self-discipline? I know it's not in style anymore but it is still the best policy.

Bottom line: pay off your credit card balance each month. Don't buy something now and expect the big end of year bonus to pay off your credit card. Even if you do get it, you will probably spend it on something else.

Don't fall into the habit of living off your credit cards. If you have $1000 of disposable income to spend each month, whether through a credit card or in cash, only spend the $1000. Don't try to make up for extra expense this month by assuming you can catch up on your credit card payment next month. It won't happen.

If you have developed bad credit habits, cut up your credit cards, or only keep one for emergencies and resolve to pay off the balance each month. Then create a plan to get yourself out of debt and stick to it.

You can relieve stress, avoid family conflicts and sleep better at night knowing that there are no credit card wolves howling at your door.