New Delhi: The credit card market is witnessing a boom and is expected to grow at a pace of 40% during this year. This is definitely good news for the banks and credit card issuing companies, but the rising defaults, credit card debt, constant harassment and credit card misuse represents its darker side.

An increasing need is therefore felt on educating the consumers about the correct way to use credit cards.

The first thing to understand is that credit card money is definitely not free money. Credit card companies charge huge interest rates, which if compared to other type of loans will simply leave you gasping. Majority of the credit cards have interest rates of 2.90% to 2.99% per month, which is effectively equal to an annual interest rate of around 41 percent.

This is not the only thing that credit card companies charge, late payment penalties, over-limit fees, cash advance fees, annual fees and other finance charges also increase the cost of credit card ownership.

Credit cards work best for those who pay the outstanding bills on or before the monthly repayment date. This way credit card companies do not charge anything as interest on purchases made using the credit card. Secondly, since there are no defaults there are no penalties to pay. So, the golden rule is to charge only that amount on your credit card, which you are able to repay before the due date. This way a consumer will built his credit history and enjoy the benefits.

Overcharging your credit card, crossing the credit limits, missing the repayment deadlines are some instances of credit card misuse which invite penalties and are signs of impending credit card debt situation.

Taking cash advances from credit cards is another practice, which a credit card holder should avoid. This normally attracts a high cash advance fees, and a cash advance interest rate is levied from the very date from which the cash advance was taken.

There are instances where credit card holders claim that they were being charged for things which were expected to be free, like the annual fees and other finance charges.

Another best credit card practice a credit card holder must follow is to get everything in writing while taking a credit card. This will end the ambiguity in the entire process and will leave a written record with you in case a dispute arises.