Function

• Credit cards usually carry much higher interest rates than other lines of credit, such as a mortgage. In addition, credit card companies would rather you pay only the minimum so you rack up as much in finance charges as possible. For example, paying off a $5,000 balance over 10 years at 16 percent interest would mean you pay $5,080 (more than the principal) in interest charges alone, according to The Motley Fool.
  
  

Considerations

• It can become seductive to put small charges, such as lunches and movie tickets, on your credit card instead of using cash, according to CNN Money. However, this can entice you to go over budget on food and entertainment--you can easily rack up thousands in debt with small charges.
  
  

Effects

• If you fall behind on your credit card payments, your credit score will suffer. When you credit score starts to dive, lenders will charge a higher interest to account for the extra risk.
  
  An employer that runs a credit check could see a low score as a potentially negative character trait. Credit card debt can also cause stress, especially for college students not well versed in managing credit.
  
  

Default

• If you fail to pay off even the minimum balance for a certain amount of time--usually 180 days--you go into default. At this point, the credit card company does not believe you have the ability to repay your debt. However, the company will still add late charges and fees to your account and go after you court--with potential judgments such as garnishments and property liens, according to Bills.com.
  
  

Tips

• Try not to use your credit card for everyday purchases, but for important ones that you can pay off in full before your grace period ends, according to Motley Fool. Consider paying off credit card bills before your mortgage--mortgages usually have much lower interest rates. If you hold a large balance, try to negotiate with your credit card company for a lower rate, or threaten to transfer the balance to another lender.