Don’t fall into the trap of spending lots of money on plastic in the belief that you only have to pay it back at the minimum monthly payment of 2%. A £1000 purchase on Mastercard will take over 21 years to pay back at the minimum monthly payment, and by then it will have cost an extra £1327!

Even worse, with payment protection you may never pay it off as after 21 years you would still have an outstanding balance of £997, and by then it would have cost you in excess of £5,283!

Also, the perils of borrowing cash on a credit card are far more significant as the interest rate for cash from a credit card is set higher than the minimum monthly payment so each month the amount of credit outstanding will increase.

There are many people who don’t realise that the APR (Annual Percentage Rate) on cash from a credit card can be as high as 28% or even 32% when normal purchases are charged at circa 16%.

You must always make sure you have the means when you spend on credit that you can habitually make sure you are paying cards off at the end of each month. If you can’t pay them off you have a choice, you either don’t spend on them in the first place, or make more money.

Personally I always choose the latter, I don’t want to stop buying what I need so I make money online as well as working full time outside the virtual world.

Paul Palmer

Ask me how and I’ll welcome you to a lifetime of residual income

It has become fashionable to have a hoard of credit cards, all with varying credit limits. In most cases spending up to the limit isn’t a problem as the banks will just increase the limit to encourage further spending.

If you are one of those who settle outstanding balances monthly, well done and its likely that you see a credit card as an essential part of your shopping habits . In this instance the short term borrowing will either be free or relatively inexpensive as the majority of credit cards do not charge interest in the first month.

It all sounds fine until you realise the perils of a thoughtless approach can cost you dear. In the wrong hands a credit card can be dangerous and commit the gullible to long term debt which ultimately can work out hideously expensive.

Other than the perils of credit cards a cardholder does receive the benefit of protection under the Consumer Credit Act and most card issuers also offer many other benefits such as cheaper insurance, fraud and identity theft protection, special rates with certain outlets to name but a few.

For those who do not fully understand the implications of using a credit card there are web sites available that can provide a totally impartial viewpoint detailing the benefits and pitfalls of various credit cards in jargon free plain English.

Paul Palmer

Eliminate debt; make money online