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By Julia Kukiewicz Staff Writer
Monday, 6 October 2008
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In the past few months our credit has been well and truly crunched into a borrower’s nightmare: squeezed loan rates and jumpy banks.
In a market like this it seems counterintuitive to boost your finances with a credit card. After all, it was too much borrowing that got us into this mess.
But thousands of consumers are doing just that – can the right card really help you to survive the credit crunch?
Should I get a Credit Card in the Credit Crunch?
There are a number of reasons to get a credit card during a crunch: you can take advantage of extra security on purchases; take advantage of much-needed rewards and pay off outstanding debts.
With inflation so high having a credit card can also be a great way to avoid missing direct debit payments on essentials such as utilities and mobiles which could lead to you being penalised, fined or, in some cases, cut off.
However, remember that credit is now much harder to obtain and easier to lose.
Banks unwilling to take on risks are looking for so-called ‘high quality’ business and rejecting a higher percentage of applications. In other words, any poor credit history just got poorer.
Before applying for a credit card make sure that you fit all the minimum requirements (these can be found on any of Choosemoney’s credit card review pages) and that you feel secure enough in your job to keep making the minimum repayments on your credit card.
If you do decide to take the plunge remember: one credit card should ideally be used for one job. Choose the category below that will help you the most and compare credit cards within that.
More Security
With many businesses dropping like ducks at a shooting party and taking their customer’s money with them, using a credit card to pay for large purchases can be a smart move.
Under section 75 of the Consumer Credit Act purchases of between £100 and £30,000 are covered. So if you make a purchase and the business shuts down, leaving you without what you paid for, you’ll be able to claim the money back from your credit card company.
Pick the right credit card and you’ll also be entitled to extra security. The comprehensive identity theft security you get with a Capital One card, for example, is over and above that offered by many debit cards.
Best card for this:
 Egg (0% on purchases for 3 months, plus extra purchase protection insurance)
More credit cards offering security on purchases and 0% on purchases...
Rewards
If you currently own a credit card and pay off your bill at the end of every month look into switching credit cards to make the most of money-saving rewards.
If you’re not paying interest on them, credit cards that offer cashback, travel rewards, airmiles and other rewards could actually help you to save money.
Your best deal will depend on where you spend the most money. If that’s in Tesco or Sainsbury’s now is the time to cash in with a Tesco Clubcard credit card or Nectar credit card, if you’re a frequent flier cash in with an Easyjet credit card.
Alternatively, if you use your credit card for all purchases you make, you should opt for a standard cash-back credit card which could offer as much as 5% back on your purchases.
Best card for this:
Barclaycard OnePulse (up to 5% cashback and other rewards)
More cashback credit cards...
Debt
This is a great time to eliminate any unnecessary costs such as interest payments on your credit cards.
If you have a credit card debt on a high interest rate card then it will definitely be worth your while switching to a 0% or low life of balance transfer credit card.
Try for a whopping fifteen months completely interest free with an Egg or Virgin credit card or pay just 6.3% interest with Barclaycard’s Life of Balance Platinum credit card.
Best card for this:
Virgin Money (0% for 15 months, and 2.98% transfer fee)
More 0% balance transfer credit cards...
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