4 signs you probably shouldn't be using a credit card

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• Credit cards are a tool that can either work for you or work against you.
• If you want to use a credit card to earn miles or points, you should be paying off your credit card every month instead of carrying a balance.
• If you're only making the minimum payment and finding that you can't make a dent in your credit card balance, you may want to consider cutting up the plastic.
• Read more personal finance coverage.

Building credit is important, there is no arguing that. And getting miles or points on a credit card can be a fun way to earn a little something for the spending you're doing anyway. But, before you can enjoy those credit card miles, you have to know how to manage your finances - and especially your credit.

Here are four signs that you should probably take a break from buying on credit:

1. You're only making the minimum monthly payment

If your credit card balance is creeping up over time, making only the minimum payment may just be the culprit.

In an ideal world, you're paying off your credit card balances in full, each month. That way, you'll avoid interest payments - and avoiding interest payments is critical, considering how quickly they can add up. Carrying a balance and making only minimum payments ensures you'll make interest payments on your credit card.

Perhaps more importantly, making only the minimum payment may be a signal that you are spending outside of your means. Don't forget, a credit card is essentially a small loan. If you find that you're not able to put a dent in your credit card balance, or that the balance is slowly growing over time, you may be spending more than you're earning. If this is so, it may be time to cut the too-easy access to credit.

2. You're missing payments

When you miss payments or make late payments, no matter what the reason, you're going to be hit with a penalty. This is a fee charged in addition to the interest payments you'll make for holding a balance.

A missed payment fee is a stinging slap on the wrist and may be another indication that you're not ready for a credit card. Managing a credit card, or multiple credit cards, takes diligence. If you're not ready to take on the responsibility of credit card management, you should consider doing without. There's no shame in taking a break from credit cards as you work on overall financial management.

3. You already have high debt levels

If you're already feeling overwhelmed by debt payments, such as student loans, a mortgage, or a car note, then you may want to avoid a scenario that lands you in even more debt. There is no perfect formula for this, but if the amount of debt you take on slowly expands over time, it's likely time for a pause. Same idea if you've got a history of overspending or have been known to rack up debt balances.

Credit cards are a financial tool; one that can be used to your advantage, or that can be used against you. It's up to you to make an active decision about which of these will apply in your case. Only open up a credit card if you are certain that you are able to use one responsibly and that it will not end up adding to an already-overwhelming load of consumer debt.

4. You're unsure of your interest rate

Credit cards companies are banking on the fact that you don't really know - or care - how credit cards charge you interest. A small charge here and there may not seem like much, but maintaining a balance over time will add up.

For the simplest way to get an idea of how much a credit card will charge you over the course of year, look to the advertised Annual Percentage Rate, or APR. A credit card's APR reflects both the interest rate charged on balances and any additional fees assessed throughout the year. Most credit cards calculate interest payments daily, but provide an APR to illustrate the associated costs stretched out over a year.

For example, carrying a $1,000 balance on a credit card charging a 17% APR for a year would theoretically cost you $170. Though this is a simplified example that doesn't account for changes to the balance throughout the year, it's a crystal-clear example of how insidious interest charges can be.

Also, a credit card may have multiple APRs. For example, a credit card could have a penalty APR that kicks into effect after a payment or two are missed, or different APRs for balance transfers and new purchases. Depending on what you plan to use a card for, always know the APR you'll be charged.

Oh, and the best way to avoid making interest payments? You guessed it: Always pay off those balances in full, each month.

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