The credit crunch has taken its toll and we’re all feeling the pinch. With lenders desperate to boost profits, it seems that borrowers are paying the price.

As many as 31 cards offering 0% on purchases have been withdrawn in the past year, according to research from MoneyExpert.com. Similarly, the number of 0% cards for balance transfers has also been cut back by 10% and the average transfer period dropping from 10 months to 9 months. On top of all that, there have been increases in rates across the market – so now borrowers are facing an average rate of 18% (ouch) when they come off their 0% period.

With the number of 0% deals on offer dwindling, you need to make the most of the best deals when they do come up. Also take some steps to improve your credit rating, to increase your chances of being accepted.

• Best cards for purchases
• Best cards for balance transfers
• Best low lifetime cards
• Best cards if you can clear your card each month

A few warnings

The golden rule with balance transfer cards is NEVER use them for spending. Firstly, they tend to charge a high interest rate – and even worse, because sneaky lenders will only allow you to pay off the cheapest debt first, the high rate will quickly result in spiralling interest. This is how credit card companies make their profits – so the message is simple – don’t let them!

Applications for credit cards, particularly close together, will affect your credit rating and make it more difficult to apply for credit in the future. The first thing you should do is check your credit rating. If you apply for a credit card and are refused your credit score will get worse. You can check your credit score for free by clicking here.

If your credit score is low don’t panic – there are ways to improve your credit rating. See our article on how to do it here.

What are my options?

If you want to pay for a large purchase over several months…

A 0% purchase card allows you to spread the cost of your spending without being charged interest. Look for a card offering the longest interest-free period. The current best buy is 0% for 15 months with the Tesco Clubcard credit card, which has a typical APR of 16.9%. It also offers nine months 0% on balance transfers with a handling fee of 2.9% and.

The Virgin credit card offers 0% on purchases and balance transfers for 13 months, although the APR is 18.9%.  Apply for the Virgin card here.

The Marks & Spencer Money MasterCard offers 0% for 10 months but the APR is a much more appealing 15.9%. Another one to look out for is the Halifax All in One Mastercard. This card offers 0% for 13 months on balance transfers made in the first 90 days (3% fee applies), and 0% on new purchases for 9 months. The normal interest rate is 15.9% APR. If you are accepted at the highest rate of 23.9% APR variable you may not be offered an introductory period on balance transfers and purchases.

Find out more here.

If you’re currently paying high interest on your debt…

A 0% balance transfer credit card is a good option if you are currently paying a high rate or are about to come to the end of a 0% rate period and need a bit of breathing space to clear your debt. With these you can move debt from another credit card and not have to pay any interest, but again, only for a set period of time. There will also be a transfer fee of around 2-3% of the debt.

If your debt will take a long time to clear…

A low lifetime balance transfer offers a relatively low rate of interest for the lifetime of the balance (until you’ve paid the debt). Some of these ‘rate for life’ cards charge as little as 6.8% APR, which is a good deal lower than the average 18%, so it can be a fantastic way to manage your debt if you think you’re going to need more than 16 months (the length of the current best buy for 0% cards on balance transfers) to pay it off.

Some charge a transfer fee (also 2-3%) but do not base your decision on this alone – always calculate whether it is cheaper to pay a transfer fee with a lower rate of interest, or to take a card that doesn’t charge a transfer fee but has a higher APR.

Here are some top picks for you to get your teeth into:

The Capital One Platinum Card offer 6.9% on balance transfers until 1st January 2012. It also offers 0% on purchases until 1 Feb 2010. Even better, there is no transfer/handling fee.

The Barclaycard Platinum Simplicity Visa credit card is a good all rounder. It has a single rate of 7.8% on both purchases and balance transfers.  The balance transfer duration lasts until your debt is repaid.

However, there are some restrictions with this card – for example, you need to be over 21 and earn at least £20,000.

Find out more here.

If you can clear your balance in full each month…

If you’re confident that you can pay off your card each month the APR is irrelevant (although to be on the safe side you should still steer clear of cards that charge horrendous rates). One of the savviest things to do if you can clear your balance each month is to grab a card that pays you to use it (yes, really!). There are cashback cards, for example, that give you back a percentage of your purchase as cash. Also, other reward cards will allow you to build up points every time you spend, which you can then use to pay for other items once you’ve accumulated enough.

The best cashback card around is the American Express Platinum MoneyBack Credit Card which offers 5% cashback for the first three months, up to £100. After this the rates vary – if you spend under £3,500 you can receive 0.5% cashback, those spending between £3,501 and £10,000 will receive 1% cashback, while spending over £10,000 will gain you 1.5% cashback.

With reward cards the trick is to go for one that offers points or freebies for things you will actually use. If you’re a frequent flyer, there are plenty of reward cards offering air miles, such as the Virgin Atlantic White Card – you get a Flying Club mile for every pound you spend anywhere. Plus, you get two miles for every pound spent directly with Virgin Atlantic or Virgin holidays. You will also earn a bonus 3,000 miles with your first spend. The card has a typical APR of 17.9%, and offers 0% on balance transfers for the first six months, with a 2% handling fee. There are also reward cards affiliated with a specific shop such as the Marks & Spencer Money & MORE MasterCard which gives you one point for every £1 spent in store at M&S and one point for every £2 spent elsewhere.

Find out more here.

Useful Links

• Marks & Spencer Money MasterCard
• American Express Platinum MoneyBack Credit Card
• Virgin card