Credit cards may seem difficult to live without, but it's becoming more expensive to live with them. That's because credit-card companies are adding layers of penalties and fees that can dramatically increase the cost of using credit.

"Just read the fine print of your credit-card agreement," says Ed Mierzwinski, Consumer Program Director of the U.S. Public Interest Research Group in Washington, D.C. "It's a license to steal."

To avoid getting squeezed, you should be aware of the methods credit-card companies use to make more money:

Universal default penalties: Card issuers check their customers' credit reports for late payments on any of their bills. Any late payment can be used as an excuse to trigger a hike in your credit card's interest rate, even if you have never made a late payment to the card issuer.

Bait-and-switch card offers: Direct mail offers advertise a card at an eye-popping low interest rate, while the fine print says the company can issue a more costly nonpremium card with a higher rate if you fail to qualify for the premium card. Just because you apply for a card with a low rate doesn't mean the card you get actually carries that low rate.

Shrinking grace periods: Historically, grace periods — the time during which your transactions don't accrue interest — were 30 days long. They now average 23 days; some cards have no grace period at all.

Inactivity charges: Credit-card companies don't make money if you don't use your cards. You could be charged as much as $15 if you haven't swiped your card in six months.

Late payment fees: The national average for making a late payment is $29. MBNA (one of the largest issuers of credit cards), Bank of America and Providian charge $39, according to Consumer Action. And paying late may trigger a higher interest rate.

Over-limit fees: Exceed your credit limit by even one cent and you'll be hit with over-limit fees of $25 to $39. And charges such as a $39 late fee can then trigger a $39 over-limit fee.

Balance transfer fees: Card companies offer a rock-bottom introductory rate to transfer your balance, but that tantalizing low rate may come with a steep transaction fee, 3 to 5 percent, for transferring your balance to their card.

In 2003, the industry made $30 billion in profits, the bulk of which came from penalty fees. The industry's take is expected to increase again this year.

Mandatory arbitration: Many credit-card agreements specify that disputes will be settled through mandatory arbitration. "If there's a dispute, you may have given up your right to your day in a court of law," says California attorney Howard Strong, author of "Credit Card Secrets."