Credit cards can be very useful things. Responsible use helps you build a good credit rating so you can buy things like a car or a home, and they're very convenient for large purchases, shopping online or times when you don't have enough cash.

However, what a lot of people forget is that credit cards are part of a massive business that's there to profit and make money. That money comes from you. At every stage of the credit card process, you are paying money, enabling the credit juggernaut.

1. Annual fees
Company earnings begin even before you start shopping. Banks and credit card companies tempt you with special offers like points for free travel or cash back options, all for a small annual rate. You might think that's a small price to pay -- but the amount you would have to spend in order to take advantage of those points is almost never worth the annual fee.

Using a card with an annual fee? Do the math -- properly -- and see what you're really getting for the amount you're spending. You may want to reconsider.

2. Interest
Even if you're not paying an annual fee on your credit card, it still has an interest rate. That is the fee paid for the privilege of borrowing money, and for most cards it's about 19 per cent.

If you don't pay off your balance in full every month by the payment due date (this is called the grace period), you'll pay interest on the borrowed money. And the longer you take to pay it off, the more money the credit card company will earn from you.

For instance, on many cards, if you make only the minimum payment each month, you'll take years to pay the balance off -- and it could be forever, literally, if you keep spending with the card at the same time. That's a lot of interest.

3. Increasing credit limits
We all read about people who are drowning in debt yet are still able to get credit cards. This is because credit card companies don't care how much debt you have, so long as they're earning interest as you make minimum payments. Why wouldn't they increase your limit or offer you more cards?

Prior to last year, credit card companies could increase your credit limit without letting you know. Now they have to have the consumer's consent before increasing it. If you don't need a higher credit limit, don't take it. Ideally, you'll be paying off your balance in full each month and won't come close to the limit anyways.

4. Cash advances
Credit card companies love when you use your credit card to take money out of an ATM or use the cheques they send you in the mail. That's because they immediately charge you interest on the amount -- there's no grace period and the interest rate is often higher than on purchases. There could also be other fees attached to a cash advance, including ATM fees.

5. Business fees
Another secret cost is that credit card companies charge businesses and merchants a fee to process a credit transaction. You might not see this cost directly (though to offset it, some businesses will charge a small fee if you want to pay with credit). But you know it's built into their operating costs -- which means it's factored into how they calculate the prices they charge you.

As you can see, credit card companies are making money at every single step of the credit process, beginning from before you even spend money (the annual fee) to interest rates, cash advances and costs to businesses.

The way to reduce your costs is to be smart about your credit card usage. Have a card with no annual fee and always pay it off during the grace period. That way you can still build an amazing credit rating, avoid debt and prevent credit card companies from taking all your money.

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