Almost five million people have been granted credit cards in the past year without having to prove their income, according to research published on Wednesday.

Some 84 percent of successful credit card applicants -- 4.8 million people -- were not asked to provide any proof of income, such as payslips, to support the figures stated in their applications in the past 12 months, according to a YouGov poll of 4,048 people.

The survey, commissioned by price comparison website uSwitch.com, also showed that 14 percent were not asked about their salary or outgoings during the application process -- yet they obtained average credit of 3,545 pounds, equal to a total of 2.9 billion pounds.

Just 8 percent of those surveyed were asked for proof of income or outgoings when taking out credit.

Some 5 percent of people confessed to lying about their salary when applying for a credit card, adding up to 70 percent onto their actual income and securing over 693 million pounds worth of credit as a result.

"We cannot ignore the fact that the credit crunch has forced lenders to tighten their belts and reject applications that may lead to further write-offs," said Simeon Linstead, head of personal finance at uSwitch.com.

"(But) the fact remains that just because a consumer appears to have a 'suitable' credit score, it doesn't mean they are always honest about their income and actually have the cash available each month to pay the bill.

"The credit squeeze will back some consumers into a corner and -- in sheer desperation -- people will resort to lying about their salaries as this is such an easy loophole to exploit."

He said it was too early to tell whether the latest version of the Banking Code, which came into effect in March 2008 and made credit reference checks mandatory, was having the desired effect.

The new code makes it necessary for companies to also take at least one of three other measures: obtain details of income and financial commitments; evidence of how finances have been handled in the past; use credit assessment techniques, such as credit scoring or internal credit scoring processes.

Credit outstanding in December rose by £1,072 million, to stand at £65.0 billion, 2.1% below the level a year earlier.

The proportion of balances bearing interest rose from 72.9% to 73.1%.

There were 195.9 million transactions in the month (11.5% more than in November and 4.6% more than in the previous December), with a value of £13.3 billion (2.9% more than in November and 3.7% more than in the previous December).

The number of cards in issue at end-December was 65,368,000, relating to 55,113,000 accounts, 64.8% of which were active, ie had a balance outstanding.

These data cover the world-wide transactions of UK resident holders of cards issued in the UK by all financial institutions affiliated to either the Visa or Mastercard organisations.

Source: BBA

Has an annual fee suddenly appeared on your credit card? If not then it may do soon.

In May last year, credit card companies had a spanking from the Office of Fair Trading. Their lucrative penalty fees were capped after the OFT ruled that any late payment or unauthorised borrowing charge levied by a credit card provider was likely to be illegal if it totalled more than £12. Most lenders had routinely charged between £30 and £40.

Now it is revealed that profits made by Britain's credit card providers almost halved last year as bad debts increased and the effects of the OFT's ruling kicked in. Banking analysts Lafferty said UK credit card providers made total profits of £1.16bn in 2006, 43% less than in 2005. Boo hoo. Except now card issuers are increasingly changing the terms and conditions of cards to recoup the lost revenue. The latest method is to bring in an annual fee.

"Most annual fees recently introduced have the common condition to charge only when the card has low usage, either in terms of the frequency of transactions or their value," says Michelle Slade of Moneyfacts.co.uk. "But we must remember there are several cards available which charge either a monthly or annual fee regardless of how many times you use your card. Generally you will be paying for the additional benefits and incentives. But the fees on credit cards need to come with a similar warning to those on packaged current accounts."

Are you really getting what you pay for?

The most common benefit is annual travel insurance, while others include purchase protection or discounted offers. But as with any benefit it's worth checking that it is something that you will actually use and gain some benefit from. Take the travel insurance offered on these cards for example; many will require you to pay for your holiday with your card, which in many instances will incur a transaction cost, ultimately meaning that it could have been cheaper to buy your insurance independently. And before you travel, check the policy covers all you need. Is it worldwide or just for Europe? Does it cover an individual or your family? Does it cover winter sports? Are existing medical conditions covered? What are the maximum payouts?

"Don't think incentives are only available on annual / monthly fee cards, as many other cards offer incentives, including a handful which include worldwide travel insurance," advises Slade. "Fees can range from £2 pm (£24 pa) to £275 pa, but alarmingly there seems to be little difference in the benefits offered. This is highlighted with the two Co-op cards listed in the table below. These cards offer the same benefits, but one charges £2 per month and the other £120 per year. The difference between these cards is the balance transfer deal available, the interest rates and the guarantee to match an existing credit limit. As neither of these cards offer the most competitive deal in the market, it would be worthwhile shopping around for the best deal and use the money saved to buy any benefits independently."

Britain's biggest card firm, Barclaycard, is the latest to threaten annual fees, starting with around 1million 'inactive' cardholders who could be told to use their card regularly if they want to avoid a fee. "We are considering a fee for a minority of customers who simply do not use their card. Details aren't yet final but we expect the amount to be between £10 and £20 - less than £2 per month," said the company. It declined to say what will constitute an 'inactive' cardholder and argues that the cost of maintaining unused accounts is borne by regular borrowers, but analysts said the fees could raise up to £20m a year for the company.

Growing trend

Barclaycard will be follow a developing trend if it decides to introduce the fee. Lloyds TSB has hit 'inactive' borrowers with a £35 fee on 50,000 accounts which provided them with £1.79million in just one month. From the beginning of this month, Morgan Stanley introduced a £20 fee for some of its Black card customers who do not use their card regularly enough. MBNA has warned those who have overpaid a bill, leaving a credit balance on their account for 12 months or more, that they must pay the £10 penalty unless they transfer the cash, spend it or donate it to MBNA's favoured charity (insert obvious joke here) by the end of March.

Fees of £24 have also been levied on Cooperative Bank's Platinum and Northern Rock's Base Rate Visa cards. The Royal Bank of Scotland/NatWest group even fines card customers £12 for failing to alert it to a change of address. It has also introduced higher interest rates on cash withdrawals. Nick White, director of financial services at uSwitch.com, warns that other card providers are likely to follow the company's lead. "Barclaycard is by the far the UK's largest card provider. It has a 15% share of the market, and if it were able to get its customers to pay an annual fee, it is likely that the trend would spread across the entire industry before too long."

Financial-research firm Defaqto believes annual fees on credit cards will become the norm by the end of this decade. Already one in eight credit card companies have at least one credit card with an annual fee, according to new analysis by MoneyExpert.com. Its figures show that the highest fee is £275 a year and the lowest £24. However despite paying for the privilege of using a credit card, customers of fee-paying cards aren't getting deals to match. Only two cards offer any kind of introductory offer on balance transfers or purchases, at a rate of around 5.5% for six months. The average standard APR on balance transfers is 16.78% and on purchases is a staggering 27.1%.

"We thought we'd seen the end of annual fees on credit cards, but we think there could be a return sooner rather than later," says Sean Gardner, Chief Executive of MoneyExpert.com. Credit card companies will be under pressure to improve profits and reduce bad debts, and that could mean finding customers who are prepared to pay for credit. MoneyExpert.com's research shows the average standard APR on balance transfers across all credit cards is 16.16 per cent, and 16.74 per cent on purchases. There are now 156 cards on the market with 0% balance transfer deals with the best offers lasting 12 or 13 months.

What do you get for your money?

Card	Minimum Income	Fee	Benefits
Citi AAdvantage Gold Visa	£20,000 pa	£25 pa *	Worldwide Travel Insurance, Baggage loss (up to £500), Flight delay (up to £500), 1 year extended appliance warranty, medical insurance and free purchase protection.
Co-operative Bank Gold Base Rate Visa	£15,000 pa	£120 pa	Free independent financial advice, discounts on holidays booked via the Co-operative Visa Travel Club and £100K of travel accident insurance.
Co-operative Bank Platinum Tracker Visa	£25,000 pa	£2 pm	Free independent financial advice, discounts on holidays booked via the Co-operative Visa Travel Club and £100K of travel accident insurance.
MBNA Travel Amex	Nil	£95 pa	Travel service, worldwide travel insurance, lost/delayed luggage (up to £1.5K), Travel inconvenience insurance (up to £750), £100K of Travel Accident Insurance and Free purchase protection, Travel and hotel savings plus concierge and priority pass service.
i24 MasterCard (Funded by Goldfish)	£50,000 pa	£275 pa	24hr travel assistance, worldwide travel insurance, lost/delayed luggage insurance, flight delay/cancellation insurance, concierge service, priority pass to airport lounges, £350K of Travel Accident Insurance and free purchase protection.
Northern Rock Base Rate Visa	£10,000 pa	£2 pm	£25K Travel Accident Insurance.

Source: Moneyfacts.co.uk

A quarter of credit card holders have transferred their balance onto another card in the last year, research from Moneyexpert.com shows.

Around eight million people have transferred a huge £6.5 billion between cards - around £760 each - despite credit card balance transfer fees averaging 2.1 per cent.

This means Brits looking for a cheap credit card could pay £105 on a balance of £5,000, though long-term savings could be much greater.

People aged 30 to 50-years-old were the most likely to be transferring large balances, seven per cent moving a balance of more than £5,000, compared to two per cent of over-50s and 18 to 29-year-olds.

And Scots lead the country when it comes to transferring the largest balances, moving £1,110.39 each on average, with around eight per cent transferring over £5,000 onto a cheaper credit card, well ahead of the national average of four per cent.

"It is yet more evidence of the UK’s debt culture that so many people have balances of more than £5,000 on their credit cards," said Sean Gardner, chief executive of Moneyexpert.

"While it is heartening that people are getting the message and taking advantage of balance transfer offers from other providers, customers need to remember that switching balances should also mean cutting debts. Changing to another card shouldn’t be seen as a licence to carry on spending."

Mr Gardner advised credit card holders to look carefully at balance transfer fees when making the decision to move debts onto a cheap credit card.

"And remember switching cards should be the first step to getting your debts under control. You need to commit to a plan to paying off your cards if at all possible."

The use of credit cards hit a plateau in 2005, the Association of Payment Clearing Services (Apacs) says.

Spending on credit cards climbed just 1% to £124bn, while the number of transactions dropped by 1% to 2.1 billion, Apacs said in a report.

The number of card holders who repaid their borrowing in full each month rose from 56% to 59%, and 95.3% of all spending in 2005 was repaid.

Apacs says credit card use has become even more cautious this year.

It points to recent figures from the Bank of England which showed that in August credit cards users repaid more money than they borrowed.

That was the first time this has happened since May 1994.

The net repayment of credit card debt stood at £311m that month, though it still left £55.4bn outstanding on credit cards. "Our figures show that UK credit cardholders are reining in their spending and concentrating on repayments - a trend which has continued throughout this year," said Sandra Quinn of Apacs.

"Nervousness about economic growth could well have contributed to the reduction in credit card spending and higher repayments, alongside media speculation about whether consumers are borrowing responsibly."

Debit cards

The tailing-off in the popularity of credit cards, which has been visible for the last couple of years, is also due to the continued growth in the use of debit cards.

The use of these cards, which draw funds directly from users' bank accounts, overtook credit cards in 2001.

By 2005, debit card usage overtook cash as well for the first time, with £89bn being spent on debit cards in shops, stores, supermarkets and online, compared to just £81bn changing hands as notes and coins.

Not only are debit cards replacing cash, they are also taking the place of credit cards for certain larger transactions.

Among them, says Apacs, were paying stockbrokers and lawyers, paying for cars and funerals - not to mention paying off credit card bills themselves.

The average value of a debit card purchase last year was £42, although 87% of these purchases were for sums less than that.

Do you currently have a credit card? If you do, then you are like most other individuals. Credit cards have increased in popularity over the past few years. Despite being popular, there are still many individuals who do not have a credit card. If you are one of those individuals, it is likely that you may have wondered if you need to have one.

Determining whether or not you need a credit card is a fairly easy process. To determine whether nor not you need one, you will need to examine your shopping needs and if a credit card may be required to fulfill those needs. Despite the fact that credit cards are increasing in popularity, there are a number of popular retail stores, hotel chains, and car rental locations that are beginning to accept other methods of payment.

If you are interested in shopping online, you may need to consider obtaining a credit card. A large number of online retailers only accept credit cards. Some online retailers are beginning to accept online checks or debt cards; however, this is something new. If you need to make a purchase now or in the immediate future, you may need to obtain a credit card to make that purchase.

While online shopping is the place where credit cards are most often required, you may also find that you need a credit card to rent a vehicle, reserve a hotel room, or make an airline reservation. You can make an airline reservation, book a hotel room, or rent a vehicle for any occasion, but most do so while on vacation. If you are interested in taking a vacation, at least someone in your traveling party should have a credit card. It may be possible to find an airline, hotel, or car rental location that offers alternative payment options; however, they are sometimes few and far in between.

The good news about shopping online or planning a vacation is that they are usually planned ahead of time. If you find that you need a credit card, you can often obtain one before you need to use it. Unfortunately, the same cannot be said for emergencies. Credit cards are nice to have in the event that something unexpected arises. These unexpected emergencies may include, but are not limited to, medical bills, car trouble, travel, and family problems.

When it comes to having a credit card, there are many individuals who are concerned with how they will use that credit card. Limiting your spending is often easier said than done. Unfortunately, there are many individuals who get into debt because they misused their credit card. If you are interested in only having a credit card for family vacations, online shopping, or unexpected emergencies, you are encouraged to select the right card. For you, the right card may be one with a low spending limit. A low spending limit may help to prevent you from using your credit card for purchases other than the ones you intended to have the card for.

Having a credit card is only a necessity if you will need to use one. There are many individuals, especially college students, who make the mistake of getting a credit card for just the purpose of having one. This is a mistake that results in financial problems for a long period of time, if not for a lifetime. Do not the same mistake. You are encouraged to examine your credit card needs; you may even find that you really don't need to have one after all.

Ever thought about paying off your credit card balances? Maybe you would like to be debt free just to reduce your stress. Or perhaps you need to be debt free to retire.

If you have Microsoft Excel running on your computer at home or work, you can use Excel's NPER function to calculate how quickly you can pay off a debt such as a credit card balance.

The NPER function calculates the term, or number of regular payments, needed to pay off a debt given its interest rate, payment amount, oustanding balance, balloon payment (if any), and, optionally, the type-of-annuity switch.

The type-of-annuity switch is a little complicated, but here's how it works. If you set the type-of-annuity switch to 1, Excel assumes payments occur at the beginning of the month, following the annuity due convention. If you set the annuity switch to 0 or you omit the argument, Excel assumes payments occur at the end of the month following the ordinary annuity convention.

But let me show you how the function works in theory and in practice. All of this will become quite clear, I'm sure.

The function uses the following syntax:

=NPER(rate,pmt,pv,fv,type)

For example, to calculate the number of £100 monthly payments required to pay off a 9% credit card that has a £10,000 balance, you enter the following formula into an Excel worksheet cell:

=NPER(.09/12,-100,10000,0,0)

The function returns the value 185.53, representing roughly 185 payments and then another roughly half payment. Notice that to convert the 9% annual interest to a period interest, the formula divides the annual interest rate by 12. Notice, too, that the payment amount, as a cash outflow, shows as a negative value while the loan balance, as an implicit cash inflow, shows as a positive value.

One final note: The NPER function rarely returns an integer, or whole-number result. As in the preceding example, it commonly returns a fractional value, indicating that after the last regular payment, an additional fractional payment will also need to be made.

Credit cards have become a necessity for some people in society. Why not? They help out a person extend his cash flow more. If you are in a tight fit and would need to use cash, the credit card can be your answer.

Because of the nice sounding concept of extending the cash flow those credit cards give. People often fall into their trap too. People often become tempted to overuse their cards and not be able to pay off the debt.

Credit cards can be very helpful. But a person who has a credit card must know to use it wisely. The user must learn to avoid the pitfalls or certain charges that can make the use of credit cards burdensome. Here are the costs that you must try to avoid from credit cards.

Grace Periods:

The grace period is the time given by the credit card companies to a card user to pay off the debt past the due date without additional charges. Grace periods was more often used by the card companies in the past. Now, card companies are charging fees for a minor time or day of payment delayed.

Before, when you charged the maximum on your card but were able to pay it off before the end of the grace period, there will be no extra charges. Now companies have reduced the grace period of 25 days and some even removed it.

Remember that the purchase you make today will be accrued immediately. So check the contracts of the card you are about to get. If there are no grace periods before the interest will build up, find another card company.

Late Fees:

Always know how much the late fees will cost you. This is because late fees can be the real burdensome fees. Card companies are making more money out of you because they have increased the late fees and removed grace periods.

So it is important, if possible to pay the bill immediately once you receive the card statement. Aside from paying large late fees, they will also report it to credit bureaus and will have a bad mark on your credit rating history or score. The card companies may also raise the interest rates you have when you don't pay on time.

Bottom line is to make better use of your credit card by avoiding paying those late fees and reading the contracts carefully.

The transactions we take for granted, such as internet payments, holiday shopping or simply spreading the cost of expensive items, would all be complicated or impossible without credit cards.

But our flexible friends can become sneaky traitors if we don't keep them under control.

Here are eight reasons you should treat your credit card with caution.

1. High rates of interest

Borrowing on a credit card is a convenient way to budget. You can pay for things as you go along and then settle the bill at the end of the month. But if you don't make full payment, expect to pay a high rate of interest - which may be all right for a month or two, but is a poor choice for longer-term borrowing.

The latest Bank of England figures show that consumers owe a total of nearly £57 billion on their cards - the equivalent of about £1,000 for every man, woman and child in the country.
Many would be better off with an unsecured loan, with fixed monthly payments.

2. Introductory rates can catch you out

Card issuers touting for custom have been offering attractive balance transfer deals and low or even 0% introductory rates.

That's great if you can take full advantage and meet your bill in full when the time comes to pay up.
If you don't, expect to be hit with a harsh rate of interest when your deal comes to an end.

3. Sneaky increases in fees

Fees are edging up, too. MBNA is increasing its maximum fee for balance transfers from £50 to £75 to squeeze card holders who regularly rotate their line of credit. It is also raising its minimum balance transfer fee from 2% to 3%. The company is also starting to introduce annual fees for customers who repay their balance each month.

4. Take a rain check on cheques

How convenient they seem, but credit card cheques are a minefield for the unwary. Banks issuing credit card cheques include Royal Bank of Scotland, HBoS, Lloyds TSB, Capital One and MBNA.
The idea that you can write a cheque to someone who does not accept credit cards - perhaps your plumber or a local shop - and have the bill charged to your credit card seems like a great idea.
The problem is you will be charged for a cash advance, which will start to attract interest as soon as the cheque is processed and probably at a higher rate than a purchase going directly on to your card.
For example, RBS Platinum and the NatWest Classic card both charge 20.892% interest on credit card cheques. They offer no interest-free period and there is a fee of 2% for each cheque used, with a minimum charge of £1.50. This compares with a charge of is 16.9% for a purchase made direct with the credit card - almost four percentage points lower. Halifax One charges 21.95% and a 2% fee for cheques, compared with 15.9% for purchases - 6.05 points higher. MBNA is raising the minimum charge for cheque and cash transactions from 2% to 3% next month.

The new fees will also be applied to many of the company's affinity cards, as well as its own cards.
Credit card cheque issuers have come under fire for sending the cheques out to people who haven’t asked for them, and tempting them into debt with a raft of charges that people don’t understand.
The Office of Fair Trading said earlier this month that consumers were facing unexpected charges up to £57 million a year because card firms were not clear about the charges levied on credit card cheques.
It called for an end to card companies sending them out to customers, unless they had agreed to receive them as part of their credit agreements.

5. Unfair exchange loading

If you travel overseas frequently, or purchase goods or services in foreign currency, check what you are being charged for currency transactions. The standard charge is 2.75%, called an "exchange rate loading", but not all card issuers charge the same. Nationwide and Lombard Direct charge nothing, Liverpool Victoria charges nothing in the euro area. The Post Office, Clydesdale and Yorkshire Bank charge 2.5%; Egg, Royal Bank of Scotland and Mint charge 2.65 % and Amex charges 2.73%.

6. Miss a payment, pay a penalty

If you don't pay your bill on time, be prepared for a late payment penalty. Fees have been hiked in recent months, as card issuers attempt to claw back losses made by 0% deals. It is estimated that banks and credit card companies earn around £500 million a year through late payment fees and interest from overdrafts on current accounts. Research from financial data provider Moneyfacts found that 31% of card customers have paid a late payment charge, and the OFT is looking into late payment fees. It has asked card companies to justify why they are so high.

Moneyfacts' Emma Butler said, "A borrower with a balance of £2,000 paying an average rate of 14.9% will only be paying around £23 interest a month. The fees for late payment and over-limit charges are between £20 and £25, meaning one mistake can double the charge on the balance.

"With large balances being transferred, and a lot of consumers being at their card limit, these charges can be compounded. A late payment can incur a £25 charge, which can then push the borrower over their limit and incur another £25."

7. Free insurance may be no insurance

Some credit cards give you free insurance, but many policies are inadequate or virtually worthless.
For instance, the small print in travel cover may mean that only the cardholder is covered, rather than the rest of the family who are holidaying together, or only the portion of travel paid for with the card is covered - so, perhaps that just covers the plane fare but not the taxi to the airport.

Analyst Defaqto found that three-quarters of the travel policies offered by card firms covered holders only while they were travelling to their destination and not during their holiday. Always buy insurance appropriate to your needs, and never rely on free cover offered with a credit card without checking the small print.

8. Inadequate payment protection

Many card issuers will try to get you to take out payment protection insurance - they make a lot of money from your premiums. PPI is supposed to cover you if you are unable to pay your credit card bill because of accident, sickness or unemployment. However, these policies are notorious for being mis-sold, and insurers have a high record of rejecting claims.

Defaqto found that more than a third of credit card firms don't even allow customers to see the full terms of their policy before they apply for credit. Insurers also fail to investigate customers' status sufficiently, and tend to rely on them taking the initiative in making declarations about their employment status or health. If they get it wrong, they end up paying for worthless cover, under which they are ineligible to make a claim. The industry is currently being investigated by the OFT, which is looking into claims of mis-selling and profiteering.

The UK credit card industry has matured into one of the most lucrative and sophisticated in the world. There are now so many providers and options for customers to choose from that there should be something on the market for pretty much everyone. No matter what your personal circumstances or financial situation, you will most likely be able to find the perfect credit card that fits your conditions.

Here is a brief explanation of some of the most popular or important types of credit card available on the UK market.

First of all there are the 0% credit cards. These have sky rocketed in the last number of years. They aim to entice customers with offers of 0% on either balance transfers or purchases or both. Most lenders will be able to provide you with a 0% credit card if you seek one, and meet the qualifying criteria.

Balance transfer cards specialise in giving you a very low, or perhaps zero rate, on balance transfers for somewhere between five and nine months usually. This means that if you were currently paying a lot in interest to your credit card provider, then the balance transfer card would allow you to switch to them and have a period of time in which no interest at all is due.

Cards for those with bad credit also exist. If you have any kind of negative credit history you will probably be aware of the difficulty involved in getting a credit card. Luckily however there are credit card providers that take a flexible approach to credit assessment and may still be willing to lend to you. You will be charged a higher rate of interest for using one of these credit cards but they do provide a useful means of getting your credit back on track. By meeting your payments on time and in full you can begin the path to improving and repairing your credit history. However, use the card wisely and do not allow it to compound your existing debt problems.

Cash back credit cards are very popular, particularly with those who do not have a difficulty in repaying their credit card in full each month. If you do repay the entire balance on your bill as soon as it arrives, then you will not need a low interest rate, as you do not pay any interest. Therefore signing up to a card that rewards you with cash or some other reward will make sense.

There are certain things in life that you will wish to avoid if you want to have a secure financial present and future for yourself and your family. Credit card debt is certainly one of those things that you should be avoiding. People do not always realise or think about it but keeping an outstanding credit card balance is one of the most expensive financial arrangements you could possibly subscribe to. If you have even an average interest rate, and not too much of an outstanding balance, you could be wasting literally hundreds of pounds a year by not paying off your outstanding balance in full each month.

There are also other problems with keeping a high amount of credit card debt. You will be making your credit rating worse for one thing. And this is something that you should be concerned about. Credit providers, banks, insurance companies and even employers will use your credit rating as a means of assessing your financial standing. If you have a very high outstanding credit card debt, or are close to your credit card debt limit, this will be regarded as a negative in the assessment of your credit score and for this very purpose, it is something that you should be attempting to avoid.

A lowered credit rating will cause you to receive worse terms and offers for future credit. For example you may get:

• Higher interest rates
• Less favourable terms
• Lower credit limits
• Refusal of credit

If you wish to avoid one or more of the above out comes, you should be trying to keep your credit card debt under control. One way to do this is to simply stop using them. Discipline yourself, or if this is too difficult, take the credit cards that you are using, out of your wallet or purse, so that you cannot give in to the temptation of using them. This way, the amounts you pay back will start to reduce your outstanding balance and you will get things back under control.

Another thing you should be making sure that you are doing is repaying more than the minimum repayment on your monthly bill. Many cards allow you to repay just the interest, and if you are doing this, it means that you are repaying none of the actual outstanding balance each month so even if you stop using the credit card, you will not be paying them off. You are simply servicing the debt. You should make sure that you are paying back the credit card balance over a reasonable period.

YOU want a personal loan. You rate yourself a typical borrower (and spender) - so that means you will be offered the loan at the advertised typical APR, doesn't it?

Er, no, not guaranteed.

You may have scoured the best buy tables for the lowest APR on a personal loan, but rest assured that such a rate is not available to all applicants.

There are more than 30 loans with an APR of less than 7% presently up for grabs.

But how does your credit rating stack up?

And have you factored in the financial impact of early repayment penalties and the cost of payment protection insurance (PPI)?

Certainly, a personal loan can make better sense than credit card borrowing in coping with Christmas expenses (last year, it has been calculated, over 50% of the UK population spent more than their monthly income over the festive season).

Bear in mind that because of rule changes by the Department of Trade and Industry earlier this year, lenders have to provide clear information upfront, enabling cost comparison.

Before you sign on the dotted line you should know: the total amount repayable over the loan's term; the frequency of repayment; such things as default or early settlement charges; and the annual percentage rate.

In addition, where a firm touts the term 'typical APR', that means it must be offered to two thirds of successful applicants.

So every third successful applicant could draw the short straw of risk-based pricing, whereby credit history is scrutinised and leads to the offer of a loan at a more expensive APR.

That is assuming you are offered the loan at all. Many lenders offering low rates cherry-pick their customers.

You may be tempted to achieve a better APR by switching an existing personal loan, but do the maths.

There might be cash inducements to switch, apart from the lower interest rate (some personal loans can be around 15%, so an advertised 7% is appealing), but will you face a hefty penalty by paying off your existing loan early?

Finally, beware the iniquitous payment protection insurance (PPI). This can torpedo a headline APR with devastating impact.

Morgan Stanley has estimated that PPI can effectively push up an annual percentage rate of 7.9% to 23.6% on a £10,000 loan.

Ironically, many borrowers sold PPI are not eligible to claim under the exclusion terms of the policy. PPI should be optional.

If it is insisted upon or you want peace of mind then go to a specialist provider where premiums will be less expensive and can be paid monthly rather than upfront, as some lenders demand.

Surprise, surprise... it is that time of the year again. The Christmas countdown has begun in earnest.

Christmas comes but once a year - but it does come round every year. So why is it, according to the Post Office, that four million Britons fail to plan for Christmas spending and a third of those that do, go over budget?

It is only natural to want to splash out, but not if it leaves you starting the New Year with a nasty debt hangover.

You may not have given much thought to your Christmas spending this year.

But be assured that the credit card industry has devoted plenty of time to thinking about it. Expect the results of their deliberations to land on a doormat near you any day now.

This time of year is especially busy for the credit card companies, as they send out an estimated 100 million unsolicited mail-shots - that adds up to an average of almost under two mail-shots per person in the country.

Many of us will be inundated, receiving anything between five and 10 such 'special' offers.

Special? Maybe, but they are unlikely to be the best. One survey of credit card mailings suggests that the charges quoted on postal offers are two percentage points higher than the market average.

Research by the Direct Mail Information Service suggests that however uncompetitive these mail-shots may be, more than two-thirds of the people who receive them are encouraged to take out a new card.

That temptation is what makes the credit card companies ever more aggressive in their attempts to achieve market share.

What is behind the postal feeding frenzy by the card providers? The internet, oddly enough.

Last year we spent a total of £16 billion online: that is a third more than the previous year.

And you can expect the figure to be even higher this year. Internet sales are expected to hit £5 billion this Christmas alone.

The high street may be suffering, but online spending is expected to jump.

While this may be good news for those of us finding a cut-price online bargain, it is great news for the credit card providers because their income also benefits.

Most card companies earn a higher merchant service fee through online purchases than they do through the shop tills.

By all means spend money on your credit card this Christmas - but do it sensibly.

Make sure you have the right credit card with an interest rate deal that suits you, not your credit card provider.

Do not fall for the siren call of the mail-shot on your doormat. If you want a new credit card, it makes more sense to compare what is available across the market.

What should you do with those postal offers? If you have an open fireplace, they make handy firelighters. If not, bin them, but remember to shred them first.

Credit cards have become a major financial industry, uniting cultures with a common form of payment and allowing purchases to be made on credit so that individuals have additional options when they're short on cash.

Unfortunately, many people see credit cards as simply a way to spend more money than they have... this isn't what credit cards are designed to do, and this disregard for their purpose can lead to credit problems and even bankruptcy if left unchecked.

Of course, some people end up abusing credit cards simply because they don't fully understand how the cards work. When dealing with credit, however, a lack of understanding can end up being quite costly in the long run.

To help correct this, below you'll find some basic information on what credit cards are, how they work, and what uses they are and aren't intended for.

What They Are

One of the biggest questions that individuals tend to have about credit cards pertains to exactly what the cards are. Are they issued by banks, or by corporations? Are they a type of bank account, or something else entirely? These questions can seem especially confusing when you hear about the companies that offer the cards, but then see those companies' cards being issued by local banks.

To make matters a bit more confusing (at least at first), credit cards are a little bit of all of the options. For the most part, they are issued by banks... however, the banks are given the chance to issue them by the corporations that created the cards or in some cases, the banks are actually owned by the corporation.

Once the card is issued, there is a type of bank account involved... the account that is associated with the card is actually a type of loan instead of a standard bank account, however.

How They Work

A special account known as a credit line is created by the bank, and it works as somewhat of an inverse chequing account... instead of depositing money into the account and writing cheques to decrease the available balance, the credit line balance begins at zero and with each usage the balance is increased.

This balance must then be repaid, as the usage of the card is simply a temporary loan that's issued by the bank.

It should also be noted that there are an increasing number of debit cards and cheque cards that are being used worldwide, and that while they bear the same company logos as credit cards and are processed the same way, they are different in that they don't use a credit line... instead, they simply draw funds from the chequing account that they are linked to as though the user had actually written a cheque.

How They Should Be Used

Great care should be exercised when using credit cards, simply because it can be so easy to get into debt with them... after all, the card will allow you to charge up to its credit limit whether you have the ability to repay the charges or not.

Instead of simply charging everything to your credit cards, you should reserve them for special purchases or for specific types of purchases.

Credit cards should be used as additional resources to get the things that you want or need, not as free money.

Make sure that when you do use your card you can afford to make the payments for the purchase... and keep in mind that the longer you keep a balance, the more interest you'll accrue and the more expensive your purchase will become.

Understanding how interest costs are charged will help you make informed decisions about the responsible use of your credit card. Used properly, your credit card provides a fast and easy way to access funds without having to carry a large amount of cash.

How You Can Minimize Interest Charges Here are some suggestions to help minimize the interest charges on your credit card:

• Pay your credit card balance in full each month.
• If you decide not to pay off your balance in full, try to pay more than the minimum balance due.
• If you carry a balance from one month to the next, consider a credit card with a lower rate of interest.
• Understand the interest charges and fees being applied to your credit card account. For example, remember that with cash advances, interest begins to accrue as soon as the cash is advanced, and with credit card issued checks, interest begins to accrue once the check has been cashed.
• Be aware that the quicker you pay off your outstanding balance, the less interest you'll pay.
• Consolidate your debt from higher interest cards-like department store cards to a lower interest credit card.
•  Make payments on time. Take advantage of helpful tools like automated payment options and the use of credit card checks.
• Be a careful buyer and know the cost of using credit cards. Be sure to read the important information in the credit card agreement mailed to you when you receive your credit card.

Store cards and credit cards have their advantages and disadvantages, but which is best for you. In this article we point out some basics to help you take control of your spending.

Store Cards

Do you have a store card? How many do you have? Do you know how much you are spending on each?

Store cards are a great idea if you use them properly, but they can cause huge amounts of personal financial damage if you don't take control.

When you are offered a store card here a few things to bear in mind:

1. Get very clear on what the offer is exactly. Most stores will offer a card with a promotional deal - say 10% off any purchases that day and for the next week. So what exactly is the offer and how long does it last?
2. Sometimes store cards are heavily pushed during a sale. Again, what's the offer - for example, do you get 10% off sale items too?
3. What are the privileges you get as a store card holder? Do you get a discount every time you shop? Do you get reward points of some kind? Do you get special preview events for new ranges? And what are the details - how many points, how many previews a year?
4. How much credit are they offering you? And can you handle it - or will it make you feel like a kid in a candy store?
5. What are the repayment terms exactly? What's the minimum repayment? What's the APR - during the offer period and after the offer period?
6. Are you bothered? It's easy to take up what seems like a great offer with no effort on your part. But remember you would probably have bought the things you are buying even if there was no store card being waved in your face. Do you really want another piece of plastic, another debt?
7. Can you get the things you want cheaper elsewhere anyway? Most things you usually can do.
8. Can you pay for the things you want using your credit card? Credit cards usually have a much lower APR than store cards - so unless you can afford to make repayments in full, you could well lose in interest payments what you gain in special offers.

Credit Cards

The same kind of questions can be asked about credit cards:

How many do you have? Do you know what you're spending? Are you in control? What are the special offers - low interest, 0% balance transfers, etc? What's the credit limit and can you handle it? What are the repayment terms, including APR?

The major differences from a store card are that you can use a credit card almost anywhere, and that the APR is usually a lot lower. It's also a lot easier to control your spending if it's all on one card.

So when you've weighed up both kinds of card, what should you do? Here's a couple of ideas:

• For general use, have just one credit card. Keep the credit limits low and in control.
• If you are offered a store card and there's an unbeatable opening offer on your purchase, take it. Then, if you can't pay off the debt in one go, use your credit card to pay it off so that you at least get lower interest charges. Next, when your shiny new plastic card arrives, cut it up! Seriously. If you don't destroy it you (or someone in your family) will spend on it and the debt spiral will continue.

As credit cards become ever more popular as a means of payment, credit card pushes forward as a major financial problems in many households. It is important to understand exactly what a credit card is and how it can affect your financial well-being if it is not properly used.

Spending Habits

So you've just got your credit card. The first thing you need to be wary about is that a credit card is very easy to use - afterall you can shop in stores, via catalogs and online with your credit card. As it is so easy to buy things with it you can find that you actually spend more than you are able to afford. As well as this, many people find that spending with a credit card does not feel like you are spending money - there is no physical cash handed over. This can lead to serious debt problems.

Controlling Your Spending

As many of us already know, a credit card can very easily get out of control. To avoid mounting credit card debt there are a few measures that you can take to protect yourself and your dependents from the stress of credit card debt.

Limit yourself to a strict budget.

Always pay off your credit card on time.

Keep track of your credit card balance - many accounts are available online.
By following these simple but tried and trusted methods you will be much less likely to fall into credit card debt.

What To Do If You Have Credit Card Debt

If you have allowed your spending to get out of control and have accrued a credit card debt, then there are some simple steps that you can take to get out of the problem. Many people operate with multiple credit cards, once they reach their credit limit on one credit card they apply for another and repeat the process. The best thing to do is to consolidate all of your credit card debt onto one card. Apply for a 0% interest balance transfer card and transfer all of your credit card debt onto the card. The balance will not be charged any interest for a period of time, meaning you can start into paying it back.

Apply for a 0% interest balance transfer card.

Consolidate all your credit card debt onto one card.

Close all your other credit cards.

Stop spending - don't add to your problem!

Start paying back your debt.

What To Do If Your Credit Card Debt Damages Your Credit Score

If you have a large credit card debt and have perhaps missed a couple of minimum monthly repayments, you may find that your credit score is depleted. In this situation you must address the problem immediately in order to protect your financial status.

Start to pay off your debt as quick as possible.

Apply for a secured credit card.

Negotiate with your lenders.