Nw,
While that makes more sense than paying for another account (with a different domain name), it’s clearly not as simple as creating a test server on your own computer:
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You don’t have to juggle domain names and subdomains (simply drop the TLD for localhost testing).
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You don’t have to upload - every file you save is “live” on the test server.
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You are always “live” on your test server - even without an internet connection.
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You can configure your test server the way you want (to trial modules like mod_speling).
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You have no fear of posting sensitive information online and having it seen (via the website - a subdomain is usually in a subdirectory).
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It’s FREE and cannot impact your host’s bandwidth OR storage OR CPU limitations!
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Finally, you asked about setting up a test environment. Doing that ONLINE is not considered (IMHO, of course) a testing environment - that is the realm of an OFFLINE environment.
There is no excuse for putting up with dealing with subdomains (or another account) on a hosting package when you can have it all on your own computer!
WARNING: That said, there is a MAJOR difference between testing offline and hosting your website on your own computer - the security issues (and violation of your ISP’s T&C) are insurmountable.
Regards,
DK