Well essentially they are a tool that allows you to obtain free credit for purchases of generally up to 56 days. You open an account with a provider and, assuming you are creditworthy, they issue you with a piece of plastic embossed with your name, individual account number and several other details.

As part of the account agreement, you will be assigned a credit limit, this defines the maximum amount of money you can have outstanding on your credit card account at any one time. Try to spend more than this limit and you will either have your transaction refused, which can be quite embarrassing in a shop queue, or you will be charged punitive interest and other fees.

In addition to the credit limit you will also have to agree to regularly make payment into your account to reduce or completely pay off the amount outstanding. There may well be other conditions of your card account and of course you will need to make yourself aware of these when you sign up.

It is common practice for your credit card provider to send you a monthly statement detailing the purchases you have made, together with any payments you have made to reduce the balance from the previous month.

Your monthly statement is a very important document and there is usually a time limit imposed by your credit card provider as to when they should receive payment from you. The provider will detail a minimum amount they need to receive in order keep your account running. You can usually remit anything from the minimum amount right up to the total outstanding balance on the account.

In this way credit cards are very flexible, if you are a bit tight for cash in the current month you can pay less than the outstanding balance and settle the difference in the next month. The problem with this flexibility is that people do not always pay off the full amount and get themselves into arrears.

Credit card providers charge interest on outstanding balances that are not paid off within the ordinary credit period of the card and in some cases these charges can be quite high so it is always in your interest to pay off the whole balance or as near to it as possible.

So the best way to use a credit card is to only spend what you can afford to pay off at the end of the month. If you need to make large purchases then you will find that a personal loan is generally a much cheaper form of credit than your card.

Credit cards usually come with other benefits attached and only by looking around and researching the market will you be able to find the card that most suits your own circumstances.

Probably the most popular and often enjoyed benefit of paying by credit card in the UK is that you usually have a form of recourse from your provider should the supplier you are buying from fail.

This is a very handy form of insurance that you can be comforted by if for instance, you order some furniture and before you receive the goods, the shop goes out of business.

All you would need to do in this situation is to contact your credit card provider and claim the amount you paid back from them. But again, this is a general rule and you should always check the individual conditions of your card to ensure you have this benefit.