How to beat the credit card crunch

Make sure you are choosing the best deal for you and not just the best deal.

Since the credit crunch kicked in it’s become much harder to use cards to manage your debts. The days of the credit tart – who shifts balances from one zero per cent interest deal to another – are well and truly over

Major banks are now turning down more than half of all credit card applications. Interest rates have risen by an average of three per cent on purchases and seven per cent on cash withdrawals. By April this year, 1.8 million cardholders had their spending limits reduced by an average of £1,680 as banks cut the amount they were prepared to lend on plastic by more than £3 billion.

Here are some tips on card applications, balance transfers and debt management:

Do your research

Don’t just respond to the first ad that you see. Read newspaper money sections and visit personal finance websites to get a feel for what’s out there and set your expectations accordingly. Most cards are targeted at a specific group of people and if you don’t fit the profile, you won’t get the deal you want. But be careful, because you can get caught by scammers. Record all conversations regarding your money (for example, using cell phone call recorder app iphone) so that you always have an proof.

A zero percent balance transfer may not be right for you

Since the credit crunch began, the few deals that there are tend to go to applicants with the best credit ratings, so don’t even think about applying if your credit history isn’t in great shape – for example, if you’ve missed some repayments in the past few years. Even if your financial status is healthy, a zero per cent deal is only worth doing if you can pay off the amount you owe within the time of the offer. Don’t add new spending to the balance if you can avoid it – it can often be repaid only after you’ve cleared the original debt, which means you could be racking up interest in the meantime.

For more time to repay your debt, chose a different card

There are cards out there designed for those who need more than the normal six to 15 months to clear their balance. These offer a steady, low APR over time. Again, don’t be tempted to add to the debt or you could still be making repayments when the next economic cycle of boom and bust comes around. LowerMyBills can help you to identify the card that’s right for you.

If you want to spend

If you pay off your balance in full each month, look for a card offering rewards linked to spending – air miles, cash-back or loyalty points. If you know you will pay interest on an outstanding balance, look for the lowest possible APR – annual percentage rate of interest – but be sure to ask for a specific quote. As usual, the best offers tend to go to the people with the best repayment records.

Applying for a loan? 

When you apply for a loan lenders use two main sources of information when deciding on whether to make an offer and what conditions – such as interest rates – to set. The first is your application form. The second is your credit report, which is the personal history of your credit accounts, including cards, loans and mortgages. If you’re using  to search for a loan it will match your credit report to the best available product on the site.

Avoid making multiple applications

They will leave traces, known as searches, on your credit report. Lots of searches could depress a credit score and could make lenders think you’re desperate for money or even that a fraud is being planned.

Don’t lose heart if you are rejected