USING credit can be a tempting way to shop, whether it's paying with your credit card, getting a loan or using the shop's credit deal.

Everyone is constantly encouraged to have what they want now and pay later - but this can be more expensive than you think. For instance, looking at one type of credit, budget/store cards, City of York Trading Standards offers the following advice:

When you chose an item in the shop the finance company will debit the cost to your budget card account, less any deposit. Each month, interest is added to the outstanding balance. Your minimum monthly payment is then credited to your account and the process is repeated until the account is paid off.

The finance company will set a credit limit on your account. This will usually be linked to your credit status and the price of the goods purchased. The minimum monthly repayment is commonly determined by dividing the credit limit by 24.

Unlike some types of credit agreement, store cards (running account) agreements are not required to show the total amount you will pay, as this can vary according to changes in interest rates, the amounts paid and if you make further purchases on your account. Remember that if you only make the minimum payment each month in the initial stages of the agreement, most of the repayments are used to pay interest charges and any insurance.

For example, a customer who purchased goods costing £792 would find that after six months the balance outstanding on the account has decreased by only £62 despite the fact that payments of £198 had been made (six x £33). This is based on an Annual Percentage Rate of 29.8 per cent (APR).

For the same reasons, the agreement will not show how long it will take for you to repay it in full. Most importantly, you should not confuse any reference to how the credit is calculated (for example, 24 times the monthly payment) with the number of repayments you will have to make. If you only make the minimum monthly repayment it is possible the agreement could take three to four years to repay.

You may be offered Payment Protection Insurance to cover your repayments in the event of unemployment or sickness. The premium is normally added to the account on a monthly basis and is generally calculated as a percentage of the outstanding balance. You should be aware that if you opt to purchase this insurance and still only make the minimum monthly repayment then it will take longer to pay off the debt. You may find it takes some time before you receive a statement of the account. This may make it difficult for you to keep track of how much the item/agreement is costing you.

Using store cards can be a very expensive way to finance purchases - look at the APR and compare costs before you buy.

For further information about different types of credit agreements, or any other consumer matter phone City of York Trading Standards on 01904 551562 for advice or to make an appointment. Alternatively call at 9 St Leonard's Place, York. You can also visit our website at trading.standards@york.co.uk

Updated: 08:46 Thursday, March 25, 2004