The basic problem with credit cards goes back to how easy they are to use. Too many people over use their credit cards and quickly find themselves maxed out and with a moderate to large sized loan to pay back. Credit cards that are maxed out are usually difficult and expensive to pay back. The outstanding balance is on a line of credit, so there is no set amount of time in which the balance must be paid off. This means that when the balance is paid down, credit becomes available and typically gets used again by the cardholder, thereby maxing it out again. Also, the minimum monthly payments on a maxed out credit card have very little impact on the princple balance.
What is the moral of the story?
Simply put, don't max out your credit cards. Don't treat your $5,000 credit limit as if you have an extra $5,000 to spend. Rather, regard it as a safety net to be used in emergencies. In a perfect world, that is the way to handle your credit cards. In a perfect world. Most people, however, end up maxing out their credit cards at some point and end up making only the minimum monthly payment. Again, the credit cards make spending money very easy and most credit cards have a healthy interest rate as well as various fees that make it difficult to get paid off.
If you are one of these people, the best thing you can do is to put all of your disposable income that you can into gettng that card--or cards--paid off as quickly as possible. Having a balance on a credit card that is more than half of the total limit has a negative effect on your credit score. When you pay your balance down below the 50% mark and when you pay it off entirely, you will see an increase in your credit score.
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