The Rate Tart

Let me start by saying that everyone's circumstances are different. With that disclaimer firmly in place, let's talk turkey.

Say you spend around £1,000 a month on credit cards, and you can afford to pay off this amount in full every month. Over a year, a cashback credit card will leave you more than £100 worse off than a 0% on purchases card.

Here's the maths. A yearly spend of £12,000 on a typical cash back card would earn me 4% cashback for 3 months and 1% for 9 months. Assuming I pay off the total debt each month, that would give £210 cash back.

The same spend on the Natwest 0% credit card paying a minimum of 2% of my balance each month would mean that I need to make payments of £1,236. At the end of the 12 months, I'd need to make a final payment of £10,764 to clear the outstanding balance.

So, instead of paying in £12,000 over a year, I can pay just £1,236 and invest the rest in high interest savings account. Assuming I used the IceSave account at 6.30% AER, this would earn me more than £300 over the next twelve months and make me more than £100 better off.

Of course, this is a more risky strategy and means I have to be on the ball with my repayments. Equally, I have to avoid the temptation to withdraw cash, use credit card cheques and overspend because if I did, I'd end up paying fees and charges. And that would quickly overtake my £100 saving.

Have you been charged a penalty fee by a credit card company within the last six years (or five years in Scotland)? If so, you can get your money back.

So what can be reclaimed? Fees for paying late or exceeding your credit limit can be reclaimed. If you've done this a lot over the years, you may be able to get a tidy sum back.

There has been some confusion about this being on hold. Whilst its true that there is a test case pending for bank charges at the moment, this doesn't effect credit cards.

Equally, it has been suggested that credit card companies have been forced to reduce their charges already. This followed a judgement by the Office of Fair Trading in April 2006 that said penalty fees above £12 for credit cards were unfair. Since most credit card companies were charging £35, they lowered their fees.

This opens up an argument in your favour if you want to reclaim charges. It means you can claim that any fees before the reduction were unfair, and so asking for the difference between the £35 you were charged and the £12 back is straightforward.

Don't be put off because you think this is a difficult process: in most cases it involves writing a couple of letters. Check our TheRateTart guide to reclaiming credit card charges, and the sample letters there to find out how.

Even if the banks say no, you don't need to go to Court. You can appeal to the Ombudsman who can decide on these matters for you. Best of all, its free.

There are lots of places advertising 0% credit card deals. It's practically impossible to watch daytime TV without seeing adverts for credit. The business of selling money is big business.

That's because credit cards make huge sums of money for providers, and they're willing to fund the industry of attracting new customers.

But before you apply for a 0% credit card, here's something you should consider. When you apply for a credit card, companies check your credit score. And they have carefully designed processing rules that are designer to point out customers who will cost them money. If it looks like you are desperate for money and have applied for lots of credit in a short space of time, you may end up getting refused for a 0% credit card.

So its worth comparing products. You can find online guides from respected sites that offer views on how to pick the right type of card for you. And when by choosing the right card for you before you start to fill forms in, you won't need to waste your time or run the risk of harming your credit rating.

Abbey has launched a new 0% credit card, and is making a big deal of treating new customers the same as existing customers.

The card has an interest free period for three months on purchases, as well as 12 months interest free on balance transfers. It also offers 5% cash back on the first £1,000 spent in any major UK supermarket.

Whilst it's great to see Abbey publicly stating that it intends to treat new and old customers the same, the proof will be in it continuing to do so.

You've got to admire credit card companies. When it comes to hiding how much their products really cost customers, they're almost as talented as budget airlines.

In the same way that a £1 flight can end up costing you £60 with luggage fees and taxes, picking the wrong 0% credit card can cost you dearly.

Credit card companies try their best to charge you at every step, and sell the money you borrow from them for as much as they can. They will borrow from savers by paying them 5-6%, but lend that out on cards at 20%. Well, someone has to pay for the marble encrusted offices.

Withdrawing cash on credit cards is incredibly expensive, and typically means you'll pay fees and charges for months afterwards. Make sure you don't use your credit card to buy foreign currency: the same high charges apply.

Equally, be wary when spending money overseas and on foreign websites, transferring balances to low rate or 0% deals, and using credit-card cheques.

10 minutes spent making sure you understand the small print may save you a packet. As will researching the best 0% credit card for you - feel free to use TheRateTart credit card guide for a comprehensive breakdown of the things you need to know.

Marks and Spencer is about to make changes to its credit card that will leave its new customers worse off.

At first the headlines look good: customers can now take out a card and get 0% interest on new purchases until the end of July 2008. This 9 month interest-free period is an improvement on the existing eight-month deal. And you can still earn loyalty points that get you money off in store.

But the standard interest rate has been increased by 1% to 18.9%. The interest charge on cash advances is 1% higher at 21.9%.

And the balance transfer charges are also being modified. Existing customer could transfer a balance free of charge and fix it at 5.9% until it is paid off. But for the new card, the balance transfer rate is 7.9% and lasts for only two years.

This is well behind other deals available on the market. Virgin Money offer a 0% balance transfer rate for 15 months, but charge a 2.98% transfer fee. Mint will let you transfer a balance until December 1st 2008 and pay no interest. Their fee is 2.5%.

Come on Marks and Spencer. Its one thing charging a premium for hand smoked salmon, but there's no reason to charge a premium for the money your customers borrow from you.

If you're thinking of funding Christmas on a credit card, which credit card should you choose? The good news is that if you're thinking about this now, you'll have plenty of time to get through the application process.

If you don't plan to pay the card off in full, rule store cards out first. They are almost always very poor value, which is why they need to offer big incentives to sign customers up.

0% on purchases cards allow you to borrow money interest free for a period of time. 0% balance transfer cards let you transfer an existing credit card debt in return for paying a fee. Check TheRateTart credit card guide for a more detailed explanation.

But make sure you know what you're getting into. If you borrow money on a credit card and don't pay back in the interest free period you are likely to pay far more than you would for a bank loan.

And if you do pay off some of the debt early, expect that the debt that you pay most money on (the highest APR), is the part of the debt you pay off last.

2007 is turning out to be an up and down year for the 48m Brits who use credit cards. Headline rates have steadied, and consumers have been benefited from reductions in minimum fees, increases in the extent of card issuers' liabilities for purchases abroad, and from increased transparency on the value of credit card protection insurance.

But on the minus side, the credit crunch has sparked fears that decline rate for credit card approvals are increasing. And away from the headline rates, the cost of borrowing is rising sharply as fees for cash withdrawals and foreign purchases, and rates for cash withdrawals are becoming more expensive.

There are now more 0% credit cards available now than ever before. Defacto published a report last week showing the growth in 0% card offers: more than 53% of card issuers now offer 0% deals on purchases, compared with 45% last October and 20% in 2002.

David Black of Defacto said: "0% introductory offers on both balance transfers and purchases show no signs of abating. The market continues to reward disloyalty by reserving the best deals for new customers."

So it looks like credit card companies have worked out how to stem the losses caused by the first wave of rate tarts, and use balance transfer fees to make 0% cards profitable.

And getting a good 0% card offer is not a given. The card industry body Apacs claims that between 40% and 50% of all applicants are rejected, with both Barclays and HBOS openly admitting that they reject at least half of all requests.

So, has the credit crunch made this worse? Opinion is divided: MoneyExpert have claimed that there has been a sharp rise in the last couple of months in the number of applicants turned down for credit. But the small sample size means the results are less than conclusive: a 2,000 person sample 6 months ago recorded a 6% refusal rate, compared with a 1,000 person sample six months later that recorded 9%.

The first sample was carried out by YouGov, and the second by TNS. YouGov described a 3% variation as within the margin of error: "Even if the research had been conducted by exactly the same firm and on the same basis, such a variation is well within the margin of error. It is not statistically significant."

MoneyExpert are unrepentant. Their spokesman said: "We took advice from independent polling experts who are of the view that given the research sample sizes a 3% change could mean no change at all or equally that there had been a 6% increase. This is the nature of research."

The card issuers say that there has been no attempt to tighten up. Barclays, Royal Bank of Scotland and HBOS say that their rules have not changed. An HSBC spokesman said: "Our decline rate has been constant for the past two years. We are refusing exactly the same proportion of applicants as in October 2005."

Lloyds TSB claims that acceptance rates have increased: "We don't refuse many applications because most of our credit card applications are from current account customers, who we know a great deal about. But our new Airmiles card has brought in high-quality applications so we are accepting more than usual."

So there are more 0% cards on the market now than ever before, and getting hold of one does not seem to be getting harder. Is this unqualified good news?

Only if you are careful to use your card wisely. Most card providers have significantly raised the cost of using their cards, with 125 separate rate and fee increases announced within the last two months. They have been hit by Office of Fair Trading's enforced reduction of fees, such as late payment charges, combined with the latest moves to reduce the easy profits they have made in the past from payment protection insurance. Sanjiv Yajnik, MD of Capital One Europe, said: "We have not changed any of our underwriting criteria. If anything, our acceptance levels are going up.

"But we are heading for a slowdown in consumer spending and borrowing, and combined with the OFT moves it is fair to say that the UK credit card market has become a lot less interesting for issuers. The inevitable result will be that there will be fewer products available, and those that are will become less competitive."

If you take a look at the easy to make rate and fee increases that generate money for credit card companies without hurting their advertising, you can see this clearly.

The cost of using credit cards to make cash withdrawals is rising, and can be seen both in the fees charged to withdraw cash, and in the rates of interest charged.

The AA, Alliance & Leicester, Bank of Scotland, Halifax and Intelligent Finance have increased their cash withdrawal fees to 3%. The Co-op, Smile, Nationwide and Yorkshire Building Society have raised theirs to 2.5%.

Interest charged on cash withdrawals has also risen dramatically. The Co-op has increased its credit card interest rate by 5% to 23.9%, which is the same rate as Smile. The most expensive in the UK are American Express at 27.9% and Goldfish at 26.8%.

And charity cards are not excluded from this. Nationwide has increased its interest rate by 4% to 22.9% on its Comic Relief Visa. Halifax has increased charity card rates to 23.95%.

Foreign currency loading has increased from 2.75% to 2.95% at Bank of Scotland, Intelligent Finance, the AA and Britannia.

So 2007 has been a mixed bag for British credit card users. As ever, it pays to know how to use your card. If you're in any doubt, take a look at TheRateTart credit card guide, and pay close attention to the fees and charges that make credit card companies easy money.

Internet Christmas shopping is something that's clearly here to stay. Online spending is expected to top £10bn this Christmas, up from £7.66bn last year. The latest surveys suggest that women will spend an average £376, and men £365.

It's easy to see the advantages: convenience, no queuing, and speed for example. But at the same time, it's worth keeping a few guidelines in mind:

1. Create a list of the things that you want and visiting a number of comparison sites to make sure that you find a good deal.

2. Be aware of delivery times as some presents may take up to 28 days for delivery

3. Set yourself a strict budget as it's easy to get carried away online

4. Start saving long before Christmas: if you must use credit, don't fall into the trap of paying heavily for Christmas later

5. Always pay through a secure method

And finally, it's well worth your while to shop around for cards that offer special deals in time for Christmas. If you pick a 0% credit card for example, you will pay just the cost of the goods providing that you pay off the balance in time.

Equally, if you are confident that you will be able to pay off the balance in full, a cash back credit card will effectively pay you to shop.