The cashback card that fixes your credit history: borrowers with bad credit offered cashback for the first time

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Borrowers with a bad credit history can now get cashback on a credit card for the first time.

The Capital One Classic Extra card gives 0.5 pc cashback on all spending, with no maximum limit. It also rewards card holders with a £5 bonus when they open their account. Cashback is credited every January.

But unlike most cashback cards, borrowers do not need a perfect credit history to stand a chance of being accepted. So-called credit-repair cards such as this are specifically aimed at people who may have struggled with debt in the past. 

Cashback: The Capital One card that offers cashback and builds your credit history

The idea is to use the card to build up a history of using credit responsibly, making it more likely you will be accepted for a mainstream credit card, loan or mortgage in future.

  More... Credit card firms pay out £50,000 in compensation for ONE woman's claim on mis-sold PPI NEW DEAL ALERT: Capital One wades in with new 5% Aspire cashback credit card

Credit-repair cards tend to have high interest rates and low credit limits of, say, £1,000. The Capital One card has a typical rate of 34.9 pc and credit limit of up to £1,500.

Louise Holmes, spokesman at comparison site Moneyfacts, says: ‘This new card from Capital One should prove popular, as it is available to all cardholders.

‘As with all credit cards, consumers must monitor their spending and be careful to pay off their balance in full each month. Never just pay the minimum repayment, as the interest will wipe out any benefits from  the cashback.’

Other good credit-repair cards include the Barclaycard Initial Visa at 29.9 pc, and the Vanquis Bank Granite card at 34.9 pc.

Barclaycard launch new 25 month balance transfer card zero interest

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Barclaycard will launch a new balance transfer card deal which will give new customers 25 months of zero interest when they transfer their credit card debts.

Bettering its existing market-leading balance transfer card by a month, the product will go live on its website on Monday, though it may be available on aggregator websites before then.

New customers will have to transfer a balance to their Barclaycard Platinum Card within 60 days of opening their account to qualify for the introductory offer.

Market leader: Barclaycard will introduce a new 25-month zero interest balance transfer card this Monday.

The transfer comes with a 3.5 per cent fee - £35 on a £1,000 transfer - but there will be a partial refund against this which reduces it to 3.2 per cent, or £32 on £1,000.

It will also come with 0 per cent interest on purchases for six months, and a typical APR of 18.9 per cent.

  More... The best balance transfer deals to help you clear New Year debts Borrowers with big credit card debts can save £830 in interest through balance transfer

Barclaycard has for some time been the market leader for balance transfers with its 24-month 0 per cent interest product, but this latest deal takes it further ahead of competing brands offering 23 months, such as MBNA, Natwest and Halifax.

Balance transfer cards are useful tools to help you reduce what you owe on your credit cards by taking advantage of lengthy periods of zero interest on existing debts.

This is Money has put together a guide to some of the other balance transfer deals currently on the market.

Derbyshire Building Society matches market-leading 5.1 percent loan rate

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The latest move in the increasingly predictable game of tit-for-tat being played by Britain's personal loan providers was made by the Derbyshire Building Society today.

Coming three weeks after Clydesdale and Yorkshire Banks announced a market-leading 5.1 per cent Representative APR rate on loans between £7,500 and £15,000, the Derbyshire has announced it will be matching that rate for its online customers.

The rate is available to 51 per cent of successful applicants on loans of between one and five years which are taken out with via www.thederbyshire.co.uk or through a comparison website.

Price matched: The Derbyshire Building Society has matched Clydesdale Bank's market-leading personal loan rate.

This would mean a £10,000 loan taken out over five years would result in £11,350.25 being paid back at £189.17 a month.

Banks and building society have been locked in battle over personal loan rates for the past year, which has seen the rates drop to the lowest

M&S Bank, Clydesdale, the AA, The Co-op, Sainsbury's Bank and Tesco Bank are among those to have slashed their prices in this time.

Paul Wootton, head of personal loans at Nationwide, which merged with the Derbyshire in 2008, said: 'Our new market leading Derbyshire personal loan rate provides a great opportunity for those looking for a low rate personal loan deal.'

  More... This is Money loan finder Clydesdale Bank sets pace on personal loans with market-leading 5.1% rate Sainsbury's Bank strikes the latest blow in personal loan price cut war with 5.4% rate

Mr Wootton said that loans at such a rate gives people looking to consolidate their debts in the New Year a chance to pay them off at a lower rate.

However, there are alternatives to a consolidating loan, which are set out in This is Money's guide to reducing your debts.

As well as Derbyshire and Clydesdale, Sainsbury's Bank also offers a 5.1 per cent rate, but only on loans for one to three years between £7,500 and £15,000.

Derbyshire BS cuts personal loan rate to 5% in week-long 'sale'

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A week-long 'sale' at the Derbyshire Building Society will see mid-range personal loans on offer at a market-leading interest rate of just 5 per cent.

The offer is now available until 11pm next Monday, February 25, and improves on the Derbyshire's current market-leading offer of 5.1 per cent (APR representative) on loans between £7,500 and £14,999 on loans between one and five years.

This would see a person taking out a £10,000 loan over five years having to repay £11,322.74 at a rate of £188.71 a month.

Market leading offer: The Derbyshire Building Society is offering personal loans for 5 per cent APR until Monday.

Derbyshire BS, which is part of the Nationwide Group, has been one of the main movers in the loan price wars that have been ongoing for over a year now.

Five per cent is now the lowest rate seen in at least the last 10 years and with the Government's Funding for Lending scheme allowing banks to obtain cash at interest rates of just 0.25 per cent, it is conceivable that rates will fall below 5 per cent in the near future.

Paul Wootton, Nationwide's head of personal loans, said: 'There are times in people's lives when they need a personal loan in order to spread the cost of a purchase.

'There has never been a better time to consider a Derbyshire personal loan, with the society now offering a market-leading rate of 5 per cent APR representative.'

Under EU rules the society is only obliged to offer the 5 per cent advertised rate to 51 per cent of successful applicants, so getting the best rate is by no means guaranteed.

It means that in the space of a year, the best loan rates available between £7,500 and £15,000 have dropped by 1 per cent, with M&S Money the market-leader in February 2012 with a 6 per cent offer.

  More... Clydesdale Bank sets pace on personal loans with market-leading 5.1% rate This is Money's loan finder Loan repayment calculator

And, according to figures from Moneyfacts, it represents a huge drop on the 7.6 per cent market-leader in February 2010, which was Nationwide Building Society.

Technically someone could now get a loan for below 5 per cent, as Sainsbury's Bank has a 'price promise' offer that guarantees they will beat a loan by 0.1 per cent.

Sainsbury's currently offers a rate of 5.1 per cent rate on loans between £7,500 and £15,000 between one and three years, and 5.2 per cent for loans of four or five years.

But if you get accepted for a Sainsbury's personal loan, and then apply for a Derbyshire BS loan within 28 days and get offered the 5 per cent rate, then Sainsbury's would reduce its rate to 4.9 per cent.

There is a pitfall of doing this however, as making multiple applications for loans or credit in a short space of time can adversely impact on your credit rating, particularly if you are rejected for one of them.

Keep payday loan sharks at bay with Capital One

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Payday loan borrowers are being targeted by a high-interest credit card, promising to ease their debt woes.

Capital One’s Balance Plus card allows you to pay money from it directly into your bank account. You can then use this money to pay off  high-interest debts.

There is a 3 per cent fee for this — so if you transferred £200, you’d be charged £6.

Candid Money: 'This new card may be a lifeline for many, but if they struggle to meet payments, their debts will still mount'

If you take out the card before the end of March, there is no interest to pay until July. In theory, this will allow you to slash the amount you owe. After this, interest will kick in at 34.9 per cent.

However, calculations by the website Candid Money show that the card would still work out cheaper than overdrafts and payday loans.

For example, someone who borrowed £200 on the card and paid back £5 a month would pay £30 in interest over six months — excluding any interest-free period.

  More... Hit by a fee for 'admin' by card? Here's how to avoid it...From holiday to cinema trips, small charges catch you by surprise - but many can be cut out Play your cards right: The best credit cards for spending, holidays, rewards or clearing your debts Find the best credit card deal

But if you borrowed £200 with an authorised overdraft charging £1 a day, capped at 20 payments a month, you would end up owing £320.

With an unauthorised overdraft, with charges of £5 a day, your debt could hit £800.

With a payday loan rolled over three times over six months and interest of 360 per cent, the cost is higher still. You’d end up paying an eye-watering £883.

‘This new card may be a lifeline for many, but if they struggle to meet payments, their debts will still mount,’ says Justin Modray, Candid Money founder.

Balance transfer war continues as Fluid launches new two-year 0% interest credit card

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Credit card providers continue to better their offers to balance transfer customers, with Fluid the latest firm to extend its zero interest period.

Last month saw market leader Barclaycard announce the longest ever interest-free period on a balance transfer card with 26 months on its Platinum product.

Other providers have been increasingly pushing the boundaries as they look to bring in new customers, offering them ever longer periods to get themselves out of credit card debt without incurring any extra interest.

New offer: Fluid has increased its balance transfer zero interest period to 24 months.

Fluid has increased its 23-month 0 per cent balance transfer card to 24 months, with those transferring from credit cards having to pay a 2.89 per cent fee (£28.90 from a £1,000 transfer).

It betters the 24-month products offered by RBS and Natwest, which have 2.9 per cent fees, but Barclaycard and Halifax offer 25-month zero interest cards with lower fees.

  More... Longest ever 0% balance transfer card is now 26 MONTHS as Barclaycard responds to Tesco move Barclaycard launches record 26-month balance-transfer card - but it has a sky-high fee to move your debts More choice than ever to pay down debts with 0% balance transfer cards Find a credit card

Its three-month 0 per cent period on purchases is also behind the market leaders, with Barclaycard's 26-month card offering zero interest on purchases for six months.

Fluid, an online personal finance brand, says its unique selling point is that it checks every customer's personal financial history BEFORE the application process, so people can apply knowing whether they are likely to be accepted.

This could be useful as multiple card applications in a short period of time can have a detrimental effect on credit ratings.

Will Becker, spokesperson at Fluid said: 'Switching to our new 24 month balance transfer card could save new Fluid customers huge amounts in interest.

'Plus, with Fluid’s apply with confidence service; we are helping take some of the fear out of applying for a new credit card. Getting turned down for a credit card can damage people’s credit scores; particularly if they go on to make multiple applications in the hope of getting accepted.'

  BEST 0% BALANCE TRANSFERS

Provider Duration* 1 Barclaycard 27 months 2 Natwest/ RBS 26 months 3 Halifax 26 months 4 Virgin 26 months 5 Barclaycard 25 months >> ESSENTIAL GUIDE: How to get the best credit card *Fees apply

Transfers must be made within 60 days of opening the account, and once the interest free period is over it charges interest of 16.9 per cent APR representative, which means it must offer this rate to 51 per cent of successful applicants.

The competition in the balance transfer market shows no sign of stopping, with Charlotte Nelson of Moneyfacts saying we could see future products exceed the 26-month market leader currently.

She said: 'Competition in this market has heated over the past few months, with 26 months the longest balance transfer we have ever seen at Moneyfacts.

'These deals could go higher with many lenders competing to be the longest balance transfer period and appear at the top of the best buy charts.

'Customers should always bear mind there is always a fee to pay when making a balance transfer so don’t go on the deal alone.'

Tesco Bank personal loans rate cuts

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A triple whammy of rate cuts by Tesco Bank has sent it thundering up the best buy tables for personal loans.

The bank has slashed the cost of its low, mid and high range personal loans which can be taken out over a period ranging from one to 10 years, depending on what the loan is used for.

The biggest cut has come in loans ranging from £5,000 to £7,499, which has seen its rate cut from 7.8 per cent to 7 per cent APR Representative, the second best rate around after the 6.9 per cent offered by Sainsbury's Bank and Santander.

Rate cuts: Tesco Bank has reduced the cost of all of its personal loan products.

This means someone taking out a £6,000 loan over three years will now have to pay back £79.29 less.

Meanwhile mid-range loans between £7,500 and £15,000, typically the bellweather of the UK loan market, have been reduced from 5.2 per cent to 5.1 per cent APR Representative, equal with market leaders Sainsbury's Bank, Clydesdale Bank and Derbyshire Building Society.

  More... Loans price war means rates have reached 10-year low of just 5.1% Need a loan? Find the best deal This is Money's loan repayment calculator

Loans between £15,001 and £25,000 meanwhile have been reduced to 7.2 per cent from 7.4 per cent, second in the best buy tables.

It should be noted however that as all these loans are APR Representative, lenders only have to offer the headline rates to 51 per cent of successful applicants, so only those with the best credit ratings are likely to get the best prices. 

CHEAPEST RATES ON £7,500+ LOANS

Provider APR 1 Sainsbury's 5.0% 2 Derbyshire 5.0% 3 M&S 5.0% 4 Clydesdale 5.1% 5 Tesco 5.1%

David McCreadie, of Tesco Bank, said: 'We regularly review our loan rates to offer our customers competitive deals, and today's rate changes reinforce this.

'Whether customers want to buy a car, pay for home improvements, or consolidate debts into one manageable monthly payment, they will find a good deal with Tesco Bank.'

The past year has been marked by consistent rate slashing by lenders who suddenly have access to cheap cash through the £80billion Funding for Lending Scheme.

But while most of the top rates are quote for loans of up to five years, Tesco offers loans of up to ten years in certain circumstances.

Loans under £15,000 have a maximum term of five years, but this can be extended to ten years for property owners who want to carry out home improvements.

Loans over £15,000 can be taken out for a maximum of ten years, except if they are refinancing loans in which case the maximum is seven years.

Longest balance transfer Barclaycard 26 months after Tesco move

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Those struggling with credit card debts can now buy themselves 26 months of time to pay back what they owe without accruing any extra interest.

Barclaycard has once again outstripped the competition by increasing the 0 per cent interest period on its Platinum balance transfer card by an extra month.

It wrested back the mantle of 'market-leading 0 per cent balance transfer card' from Tesco Bank, which held it for a matter of hours yesterday when it revealed a 25-month 0 per cent period with a lower fee than Barclaycard's on its Tesco Clubcard Credit Card.

Balance transfer: Barclaycard is offering its longest-ever interest-free balance transfer period at 26 months.

Barclaycard's 26-month card comes with a 3.5 per cent fee, meaning you would pay £35 to transfer over £1,000 from other credit cards. Any amount you transfer must not exceed 90 per cent of the credit limit on the card.

Tesco Bank's comes with a 2.9 per cent fee, or £29 on £1,000, but you are allowed to transfer up to 95 per cent of the credit limit.

  More... Need a balance transfer card? Use our card finder Check your credit score More choice than ever to pay down debts with 0% balance transfer cards

Tesco also offers a more generous interest rate of 16.9 per cent Representative APR once the interest free period ends, with Barclaycard offering 18.9 per cent. Using the Tesco card also builds up Clubcard rewards.

Barclaycard however is offering six months zero interest on purchases, rising to 18.9 per cent Representative APR thereafter, whereas Tesco Bank only offers this for three months, albeit with 16.9 per cent APR.

Michael Ossei, of uSwitch.com, said: 'The battle in the credit card market is heating up.

'While the 3.5 per cent fee is hefty, Barclaycard's market-leading deal signals that it means business in the credit card arena.

Clubcard: Tesco credit card customers can build up Clubcard rewards.

'Six years ago, the longest 0 per cent balance transfer offer lasted 12 months. Today, this has more than doubled, with Barclaycard becoming the first provider ever to launch a balance transfer card with an interest-free period of 26 months.'

Despite Barclaycard being the market leader, Mr Ossei believes that supermarkets could be gearing up for a serious assault on the market.

He said: 'Tesco has a unique advantage over its rivals – it is able to tap into a base of over 16 million loyal Clubcard customers. With clear insight into consumer shopping habits, Tesco is gearing all of its financial products and services around what the customer wants.

'With this in mind, I would not be surprised to see Sainsbury’s Bank step up its credit card offering, using its base of Nectar customers.

'While Barclaycard remains the frontrunner in the balance transfer space for the time being, supermarkets and high street brands are now finding their footing.

'Market leading rates and products could soon become the norm for these new players as they start using data and customer insights to develop more appealing financial products for their customers.'


Shoppers warned to look beyond offers before getting store or credit card

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Shoppers have been warned to look beyond enticing introductory offers to ensure they get long-term benefits from store cards and retailer-branded credit cards.

There are good deals to be had for savvy shoppers with reward points, cashback store vouchers and discounts all on offer, but doing your research rather than making a spur-of-the-moment decision at the till can reap its rewards.

Moneysupermarket said consumers will get much better deals from supermarket credit card products compared to store cards, which typically charge interest at much higher rates than major credit card providers, at around 29.9 per cent.

Better deal: Supermarket-branded credit cards offer better rates and rewards than store specific cards.

The best buy supermarket credit cards have typical interest rates of around 16.9 per cent, the same as some and better than many High Street banks.

They come with the usual introductory offers designed to lure customers in, but those with ongoing rewards once introductory periods have ended can really make using them pay off.

  More... Splashed out at the shops? How to beat store card debts and avoid their traps The gender debt divide: More women turn to credit cards and loans to make up for their lack of income Looking for a credit card? Find the best deal Check your credit score

Marks & Spencer sits atop of the Moneysupermarket table for retail credit cards due to its generous points rewards. It gives shoppers one point for every £1 spent at M&S, and for every £2 spent elsewhere.  A hundred points are worth a £1 M&S reward voucher.

Cards from Tesco, the John Lewis Partnership (including Waitrose) and Sainsbury's offer similarly generous points rewards for spending on cards, with Tesco's Clubcard Credit Card providing the same points rewards when you buy fuel from a Tesco filling station as you would get in-store.

As with any credit card, you should make all attempts to pay off the entirety of your bill each month once interest-free periods have ended. Large purchases, which will take a while to pay off, should ideally be made when you have zero interest.

Paying your card off each month is particularly important if you have store cards, which have a higher-than-average rate of interest.

Kevin Mountford, of Moneysupermarket.com, said: 'It's easy to see why it can be tempting to open a store card, as the introductory offers that come with these can really help you save on the day of purchase.

'However, shoppers should be wary of the high interest rates that come with store cards, which will negate the advantages if the balance is not repaid in full.

'A credit card is a better option for those who want to spread the cost of a big purchase, as you can take advantage of one of the deals offering an interest-free period on purchases.

'In addition to these promotional offers, many of these cards also offer on-going rewards, which can help make your money go further. However these cards should also be used responsibly.

'Shoppers need to ensure they pay their balance off before the interest-free period ends, and that they aren’t late making a repayment so as to avoid being hit with a late fee.'

Store cards: Moneysupermarket's list of the top store specific cards for rewards.

Supermarket credit cards promise better deals in the long-run, but some store cards do provide ongoing rewards.

The Top Shop store card for example, after hooking customers in with £5 off on a £50 spend, will provide free delivery twice a year on purchases over £50, as well as 10 per cent off in store in the first week of summer and Christmas sales.

But, with 19.9 per cent interest, making just the minimum repayment each month would see the interest on £500 of spending mount up to £93.85 by the end of the year, so paying off your balance each month is vital.

Mr Mountford added: 'For some people, a store card can be a good option, particularly those who haven't used credit before as you will generally be given a low credit limit and be able to build up your credit rating if used correctly.

'However, don't just be lured by discounts at the till. Think about what is best suited to your needs and always read the small print, otherwise you may end up paying far more in the long term than your initial item cost.'



Check your credit rating and beat ID fraud

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Advertising feature

Credit rating: What does yours reveal

How to improve and protect your credit ratingWhat’s in your credit report?

Your credit report is essentially an overview of your borrowing behaviour - a personal history of the credit you’ve had, from mobile phone accounts to mortgages and more, and lenders use it to help decide if you'll be able to make new repayments on time.

There’s information that confirms your identity - such as electoral roll details - information about previous credit applications you’ve made, and there’s financial information, such as a list of your credit accounts and repayments. 

They may not expect you to have a perfect credit report, but they do want to know that you will make repayments on time and that you aren’t already over-stretched.

It’s best to check that your credit report is accurate and up to date – to give yourself the best chance of getting credit, getting the deals you want, and to help protect yourself from ID theft. With Experian CreditExpert, you can see your credit report and Experian Credit Score whenever you want, and get expert advice on improving your financial situation.

Why was I refused? What can I do now?

Being turned down for credit can be disheartening, but you can take steps to help make sure it doesn't happen again. 

First, understand why you were turned down - asking the lender is a good starting point and they should be able to tell you the main reason. You may be better off applying for a different credit product. As a CreditExpert member you can get help finding finance deals that suit your credit profile.

Perhaps you have missed some payments on cards or loans you have, or there are mistakes on your application form. Missed or late payments stay on your credit report for at least six years. It could be that you're not on the electoral roll, as that helps to prove your home address.

Making multiple applications in a short space of time can also make lenders believe that you’re in financial difficulties, or even a victim of fraud. Each application is likely to cause the lender to check your credit report and leave a credit application search footprint. Lots of these may cause alarm, regardless of whether or not you were approved, which isn’t actually shown on your report.

With a free 30-day trial of CreditExpert* you can see your credit report and Experian Credit Score whenever you want, and get expert advice on improving your financial situation.

How do I improve my rating?

When you make an application for a loan, credit card, mortgage or other type of credit (such as a new utility contract or mobile-phone account), lenders look at your credit report to work out your credit score. So check your credit report regularly to make sure it’s up to date and accurately reflects your circumstances.

Your credit report lists your credit accounts, including loans, credit cards and your mortgage, along with your repayment record. Lenders use information from it to calculate your credit score, so it pays to make sure it’s accurate.

You can see your Experian credit report for free with a 30-day trial of CreditExpert*. Pay particular attention to personal details, such as your name, address and date of birth – even minor mistakes could lower your rating. If you find an error, contact the relevant lender and ask for an amendment.

Top tips on building a great credit rating:

•    Use some credit on a regular basis, but never take on more than you can afford.

•    Stay within the agreed credit limits and always make your repayments on time, paying more than the minimum off your credit cards each month if you can.

•    Space out your credit applications and avoid making several applications close together as this can signal financial stress.

•    Make sure you register to vote at your current address - lenders use the electoral register to help confirm who you are and where you live.

•    Get into the habit of reviewing your credit report on a regular basis, paying particular attention to the following:

-     Make sure everything is accurate and up to date and query anything that isn't.

-     Review financial links to other people and ask for any outdated links (e.g. to an ex-partner) to be broken.

-     Explain any missed payments by adding a 'notice of correction' – a statement of up to 200 words.

-     Review your credit utilisation rates (i.e. your balances versus your credit limits) and aim to keep them below 30 per cent.

-     Credit scoring can look at the average age of your accounts, awarding extra points for longstanding relationships, so try not to chop and change all of your accounts on a regular basis.

Watch out for unfamiliar or suspicious entries in your credit report. With Experian CreditExpert* you’ll get alerts every time there's a major change to your credit report, which could indicate identity fraud.

Busting the myths around credit ratings

Here are the truths behind some of the more common misconceptions:

-    There is no such thing as a credit blacklist. Lenders only want to be sure that you aren’t taking on more credit than you can comfortably manage. The information held on your credit report is simply factual and can mean different things to different lenders.

-    Credit checks are done on people, not addresses. If you share or have shared an address with someone – whether a relation, a tenant or someone you don’t even know - your credit reports will not be linked unless you have had joint financial accounts or one of you has been a guarantor for the other.

-    Past debts do count - court judgments for non-payment of debts, IVAs and bankruptcies and missed credit payments stay on your credit report for at least six years. Any of these could count against you, because lenders could think that you will miss payments with them too.

-    Credit reference agencies like Experian can’t decide whether you get accepted or refused. That’s up to lenders, who use the information in your report, along with items from your application, when they calculate your credit score.

-    Finally, your credit score is not set in stone, and there is no magic number. Each lender uses a unique method to calculate credit scores. Your credit rating changes along with your circumstances, so you can take steps to improve it. The Experian Credit Score, which you can see when you check your credit report through CreditExpert, is designed to help you understand how a typical lender will view your credit report information.

* New members only. Monthly fee applies after free trial. Free trial period starts on registration – further ID verification may be required to access full service, which may take up to five days.

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Calculator: Credit card repayment reality check

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This credit card calculator can throw up some shocking results. See your payments and see what happens if you've been lured into taking a credit card with a low-interest introductory offer that has expired, forcing you to paying higher rates for longer, much longer.

TABLES: Best balance transfer credit cards Credit Card Reality Check Calculator

Warning: This calculator does not factor in the time it would take to repay a credit card debt where the minimum payment is calculated as a percentage.

Your plastic debt

This calculator will show you just how long it's going to take you to clear your credit card balance if you don't wake up, face reality, stop paying the bare minimum and start clearing this punitive form of debt.

Your credit card balance: £ Interest rate: % Monthly payment: £ Calculate Result Number of monthly payments: Clear your debt quickly

Now see how much you need to pay a month to clear your balance in the shortest possible time.

My free holiday every year with savvy credit card spending

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For the past three years, Nellie Morley has taken her two daughters to the South of France — for almost nothing.

Mrs Morley, a former property worker, is not a whizz at competitions. Neither is she lucky in prize draws. Rather, she is simply a savvy spender.

That’s because Mrs Morley tries to make sure every pound she spends earns her loyalty Avios points — 27,000 to be precise. Once she has enough, she cashes them in for flights to Nice, which allows her to take daughters Jessica, 13, and Alex, ten, off on holiday.

In the money: Nellie Morley and her daughters Jess, 13, left, and Alex, 10, right, pictured at their home in Chiswick, go to the South of France every year for virtually nothing thanks to savvy saving

Holiday for free: Being clever with your credit card can mean big rewards such as annual holidays to Nice, in France, like the Morley family

To build up this huge balance of points, Mrs Morley uses her Lloyds TSB Duo Avios American Express and Mastercard credit card whenever she can — paying off the bill in full every month. And she uses a Tesco Clubcard to build up extra Avios points on top.

Like many mums, she can spend as much as £2,000 a month on the card.

  More... Cashback vs rewards: Which credit card really pays the most? Barclaycard scraps 'Freedom' loyalty scheme

‘Everything is so much more affordable for us and we wouldn’t be able to go on holiday as much as we do if I hadn’t been collecting Avios. We don’t have to think twice about travelling,’ she says.

‘This way we are getting something back for the money we spend. I’m saving my points for the girls and me to go for a break in New  York.’

Mrs Morley is not alone — increasing numbers of cash-strapped families are turning to loyalty and cashback cards to make their spending go further.

Increasing numbers of cash-strapped families are turning to loyalty and cashback cards to make their spending go further

Here, Money Mail shows you how:

LOYALTY CARDS

The five largest schemes are Avios, Nectar — which most shoppers associate with Sainsbury’s — Boots, John Lewis Partnership and Tesco Clubcard.

Each scheme rewards their most regular shoppers differently.

NECTAR

Nectar is by far the largest loyalty scheme and has 18.5 million customers. You can earn points by using your card in Sainsbury’s, when paying household bills, buying petrol and online at more than 500 retailers.

Normally every £1 you spend gets you two points — though you can  boost this by taking advantage of promotions.

You can earn extra points by using a Sainsbury’s Nectar credit card or a Sainsbury’s Gold credit card — which normally give you one point for every £5 you spend outside Sainsbury’s. Inside Sainsbury’s, that rises to two points for every £1.

So if you pay using your Sainsbury's credit card and present your Nectar card — known as double-dipping — you earn four points for every £1 you spend. However, you can do this only for the first two years.

The fastest way to collect points is with the separate Nectar credit card where you can double-dip at all Nectar partners and that way you get up to 4 points for every £1 spent.

You can also get one point for every pound spent on your card elsewhere and 500 extra points for every £500 you spend on your card each month.

You can redeem points by getting money off your Sainsbury’s shopping bill or saving money at numerous stores including Argos, Homebase and Blockbuster.

One trick with Nectar is to use points for family days out at linked attractions such as Legoland or the Orient Express.

Nectar card holders can also book easyJet flights with their points — even at peak times.

TESCO CLUBCARD

Tesco Clubcard has 16 million customers, works in much the same way as Nectar, but the main place you can earn points is shopping in Tesco.

You get one point for every £1 you spend. A £100 trolley of shopping will earn you £1 in your pocket — the same as Nectar.

Using a Tesco Clubcard credit card also earns you points: one point for every £4 you spend outside Tesco and five for every £4 spent in store, including on fuel at its petrol stations.

Tesco translates points into vouchers to use for in-store shopping or various rewards, from holidays to driving lessons.

AVIOS

Avios or Airmiles as it was known, has 2.2 million collectors.

Shoppers can earn points by using their card at various stores or by booking flights with British Airways. And Tesco shoppers can exchange clubcard vouchers for Avios points — £2.50 in vouchers is worth 600 points.

You can earn more Avios points by having a Lloyds TSB Avios Duo credit card. This is a credit card account that has an American Express card and a Mastercard. You get one bill and one credit limit for the two cards.

The reason for the two cards is that, though you earn one point for  every £1 spent with the Amex card, it is not as widely accepted as  Mastercard — particularly outside cities.

The Mastercard earns one point for almost every £5 spent.

You can build up points and then cash them in for flights, accommodation and other holiday perks.

However, a frequent criticism in the past of Avios has been that the number of seats on each flight is limited, and in the school holidays families find it nigh on impossible to use their points.

Also, despite being so-called ‘free flights’, for those wishing to travel outside Europe you have to pay the taxes and charges — sometimes nearly as expensive as the flights.

BOOTS

The Boots loyalty card, which has 17.8 million collectors, is the most generous scheme.

For every £1 spent you get four points, which means a £100 basket of goods will earn you £4 future discounts.

You can also collect points through Boots online, where they have partnered with retailers such as Mothercare, Lakeland and Comet to save you at least one point for every £1 you spend.

JOHN LEWIS

The John Lewis Partnership Card has 580,000 collectors. It technically works in the same way as a cashback credit card, only it sends you in-store and online vouchers for the shopping you do in John Lewis or Waitrose.

Every £1 spent in either store earns one point and shoppers can also earn one point for every £2 spent out of store. You will be sent vouchers three times a year.

And remember, there is a price for your loyalty. The reason companies run these schemes is so they can get marketing information about you and use it to try to sell you things you might not want.

CASHBACK CARDS

These cards give you cash in hand for every penny you spend. For big spenders, this can be considerable.

You need to be disciplined and make sure you don’t spend more than you can afford to pay off your bill in full every month.

If you don’t, the interest and charges will far outweigh the value of the cashback.

Typically, you get back between 1 per cent to 3 per cent on spending and this is paid to you once a year, either into your account or sent by cheque.

So, if you spent £1,000 over 12 months, you could get back up to £30.

You can earn different rates depending on where you spend your money.

With the Santander 123 credit card, you get 1 per cent cashback on spending in the supermarket, 2 per cent cashback on spending in department stores and 3 per cent on fuel.

The card has an annual fee of £24, so you need to spend £2,400 to make it worthwhile.

American Express Platinum Cashback Card offers 5 per cent to start for the first three months, followed by a rate of up to 1.25 per cent. However, some stores don’t accept American Express.

The Capital One Aspire World card pays 5 per cent cashback for three  months, and after that it pays 0.5 per cent on spending up to £5,999, 1 per cent between £6,000 and £9,999 and 1.25 per cent on spending above £10,000.

The AA credit card gives members 4 per cent in vouchers for AA products, 2 per cent vouchers for High-Street shopping or 1 per cent cashback.

The five golden rules of loyalty cards

1. You need commitment and discipline.

2. You must shop in the same places regularly and always use the same cards to pay.

3. Pick a scheme that will suit your lifestyle — not one that requires you to go out of your way to use.

4. Pay off your bills on time and in full every month — otherwise any benefit you have got could soon be eaten away by unnecessary payments and charges.

5. Double-dip — by using a loyalty card and a credit card together



Loan repayment calculator

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DON'T MISS: Latest info and advice - catches to watch out for and the best ratesTODAY'S TOP DEALS...

...See our full best rates table

Loan Repayment Calculator

This calculator shows what your monthly payments would be for a given loan, where interest is compounded monthly. Payment protection insurance is excluded.

Choose the cheapest personal loan

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A personal loan is what it says: a loan for you to spend as you wish.

It could be for a car, home improvements, or even to pay off credit card bills in one go, allowing you to spread the repayments over a longer time at a lower interest rate.

Here are the key issues to consider when choosing which loan to take out.

Confused: Are you looking for a personal loan? We explain how to apply

Borrowing limits

You can generally get up to £15,000 - but some lenders offer up to £25,000. You can often get approval in principle over the phone with the money available in just a few days.

Loan terms

Some lenders will give you a loan for as short a period as six months, although a year is more common. The maximum length is usually seven years, although some firms will lend over ten.

Personal loans make the most sense for people who want to repay something over a few years. If you only need the money over six months using your credit card probably makes more sense.

Providers

Banks, building societies and, increasingly, supermarket chains offer personal loans at competitive rates.

Avoid loans from small firms that you have never heard of - this is a lightly regulated area and some of these loans can carry high interest rates coupled with heavy redemption penalties should you decide to move your loan to a cheaper firm.

Reputable firms generally charge penalties of no more than two months' interest if you pay off the loan early. Shop around - your mortgage lender may offer you a preferential rate, for example, but you might still be better going elsewhere.

LIST THE CHEAPEST LOAN RATES

Interest

Rates are generally fixed for the duration of the loan, which means you know exactly how much you will repay each month.

The disadvantage is that you could be paying more than borrowers who take out a similar loan in six months' time - on the other hand you could pay less.

Either way, you do not have to worry about your repayments soaring. Many lenders will insist that you take out a direct debit for the repayments.

Generally, the interest rate falls if you take out a larger loan. The crucial rate to look for is the APR - annual percentage rate - which includes the effect of any arrangement fees you have to pay, although few lenders actually charge these today.

Credit checks

Lenders want to make sure that you are a good risk and do not have a history of bad debts and unpaid loans behind you. To do this they will check your entry on credit registers.

A poor credit record won't necessarily prevent you from getting a loan, but you will probably have to pay a higher interest rate. You may find it harder to get a loan if you are self-employed or are on a short-term contract.

Unsecured loans

Unlike a mortgage, this type of loan is not secured on your home. If you fail to repay the loan, the lender cannot repossess your home. That is why the interest rate is higher than for a mortgage.

Best credit card guide

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As a nation we have fallen in love with credit over the last decade. If you are thinking of getting a credit card, you may find the huge variety of deals available overwhelming.

Here are the key issues to consider before choosing or changing your card.

Do your research: Multiple applications can hurt your credit score

The best card for you

Before taking out a credit card you should think about what you need it for.

There are many different types of credit cards on the market, from balance transfers to cards which give you cashback in return for spending.

We're rounded up the top five types of cards, so you can work out one is best for you.

0 per cent purchase What is it: 0 per cent interest on any spending you do on the card for a limited time. After this period the interest you pay will drastically rise. Best for: Anyone wanting to buy a large item and pay it off within the interest free period.

Balance transfer What is it: This card allows you to transfer your balance and pay it at a lower rate (usually 0 per cent). Best for: Anyone who has a large balance that they need time to pay off. Beware of spending on this card however as APRs are usually high.

Rewards/cashback What is it? These cards reward customers for spending - you can earn back cash, points and even airmiles. Best for: Anyone who is very good at paying their balance off in full each month and wants to earn extra for spending.

Best for abroad What is it: These cards offer no, or very little, commission or fees when using them abroad. Best for: Anyone who is going on holiday or regularly needs to spend abroad.

Special offers

Many banks have special debt-transfer offers to recruit new customers. These may give you the opportunity to pay off debts from an expensive card at a reduced rate for a limited period.

There are dozens of cards on the market offering 0 per cent interest on balance transfers, from six months but the best offer is currently up to 20 months.

Be aware that the reduced rate does not apply to new spending, only to the transferred balance. Some firms waive the first year's annual fee for new customers with a certain amount in their bank account. Some cards offer free purchase protection insurance.

Protection

Paying for expensive items (goods or services over £100 and under £30,000) with plastic offers the advantage of extra consumer protection. Section 75 of the Consumer Credit Act makes the card company liable (along with the seller of goods or services) in case of breach of contract.

So if you don't get the goods you ordered, for example, and the firm goes into liquidation, you should be able to get your money back on your credit card.

Purchase protection schemes run by the card companies - in addition to those legally required by section 75 of the CCA - require you to spend £100 on one purchase to qualify for this valuable protection. This does not apply to most debit cards, such as switch and delta, where the money leaves your account automatically.

 INTERACTIVE TOOL: Compare the best credit cards

Penalties

Most, if not all, cards will charge you if you miss the monthly deadline set for your payment. However, after lobbying of the credit card industry, the maximum any provider can charge is now £12. Some lenders also strip away special low rates.

The easiest way to avoid this penalty is to set up a Direct Debit from your current account to your credit card to pay off at least the minimum amount each month. Ask your card provider for a form.

You will also be charged if you go over your credit limit. There can also be catches such as charging you interest immediately on a new purchase if you didn't pay off your last bill in full.

Cash

If you withdraw cash using your credit card you will pay a much high rate of interest. This also applies if, for example, you use your credit card to pay for foreign currency, unless the card is for specific use abroad.

How to beat store card debts and avoid their traps

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Store cards can be tempting for shoppers as they offer money off purchases and a host of other benefits - but they rarely offer good value for borrowing.

For those who can afford to pay off their balance each month it can be worth taking advantage of the benefits of store cards. Cash-conscious shoppers on the hunt for discounts can save as much as 20 per cent on purchases by using them.

But, of course, many people don't end up clearing the debt in full and that's how the card operators make their money.

Christmas shopping: Store cards offer discounts to lure in cash-strapped shoppers

If you find yourself lumbered with debts on store cards, here we explain how to move them to a cheaper rate and get it paid off more quickly.

And for those interested in taking advantage of the benefits of store cards, we explain how to negotiate the small print and avoid paying potentially hundreds of pounds in fees.

High Street store card fees - the high cost of splashing out Smallprint: Latest store card figures

Source: Moneyfacts - provided exclusively to This Is Money. Correct as of January 7

STORE CARD TRAP: A CHARGE FOR NOT SPENDINGAs if the high APRs aren't bad enough! Some store cards even bill you for being in credit.Santander Cards, which runs store cards for Topshop, Harvey Nichols and Burton among others, will charge up to £10 if, for example, you make a purchase, but later return it and don't buy anything else for three months.They can also charge if you do not use your card within a six month period -  it's called a 'dormancy fee' - although 30 days notice must be given to the cardholder.The charge, which was introduced in December 2010, applies to all store cards supplied by the Spanish-owned bank including (but not limited to):•    Burton•    Debenhams•    Dorothy Perkins•    Evans•    House of Frasier•    Laura Ashley•    Miss Selfridge•    Monsoon•    Outfit•    Russell & Bromley•    Topshop/Topman•    WallisRemember...

If you use a store card, pay off your debt as quickly as possible.

With a store card, you should be getting a 10 or 20 per cent discount off your initial purchase.

That sounds tempting, but if you reach the end of your low-interest period and start paying the 30 per cent interest that is common, savings will be quickly cancelled out.

And if you miss a payment and get hit with big fees, costs will soon spiral.

Paying off your store cards

The main concern for store cardholders is avoiding the eye-popping interest rates which typically start being charged after around 60 days.

The temptation to spend on the cards often leads to people splashing out and then discovering they can't clear the debt straightaway.

The worst hit find themselves with debts on multiple cards that they are struggling to pay off.

Consolidating card debts together using a 0 per cent balance transfer credit card is perhaps the best way to avoid sky-high interest rates.

Because these cards offer a period in which no interest will be charged, every pound you pay can go directly towards reducing the size of your original debt.

Repay within the interest-free period, or switch after that to another 0 per cent deal if you haven't repaid.

Usually you will need to pay a fee to transfer your debt - around 3 per cent of the balance. There is also a requirement for debt to be transferred within a set time frame.

Be warned: These cards are usually only an option if you you have a good credit rating, and some card operators will not grant cards if you have applied for credit with them during a specified preceding period.

Rates will also depend on factors including your income, debt balance and repayment plans.

And remember, while balance transfer cards often come with a 0 per cent period for new purchases as well, you are trying to repay debts, not build up more. So think hard before buying anything else with credit.

0% balance transfer - Some of the bestBarclaycard Platinum 24 month - longest 0% deal

Intro balance transfer offer: 0 per cent for 24 months, 3.2 per cent fee (the lowest among its competitors) 

Intro purchase offer: 0 per cent for 3 months

APR: 17.9 per cent

Restrictions: You must transfer within 60 days and earn a minimum income of £20,000. You can't transfer debt from other Barclaycards

Benefits: Contactless payment for purchases up to £20. Transfer more than £2,000 and get a reduced fee of 2.1 per cent.

Barclaycard Platinum 23 month - second longest 0% deal

Intro balance transfer offer: 0 per cent for 23 months, 3.2 per cent falling to 1.9 per cent fee - 1.9% HANDLING FEE APPLIES

Intro purchase offer: 0 per cent for 3 months

APR: 17.9 per cent

Restrictions: The way the fee is charged seems a bit confusing. To start with, 3.2 per cent is charged but a sum is refunded so that the fee effectively falls to 1.9 per cent as long as certain conditions are met. The refund is then credited to you within 28 days. The lower fee means this card could prove a better bet than the 24-month Barclaycard, if you can pay it off one month earlier.

You must transfer within 60 days and have a minimum income of £20,000

Benefits: Contactless payment for purchases up to £20.

HSBC Visa

Intro balance transfer offer: 23 months, with a 3.3 per cent fee

Intro purchase offer: 0 per cent for 3 months

APR: 17.9 per cent

Restrictions: Although this card could potentially offer a nice, long 0 per cent balance transfer deal, to be eligible you must be an HSBC current account holder. HSBC will also look closely at your credit rating. 

NatWest/RBS - second longest 0% deal, but high fee

Intro balance transfer offer: 23 months, 0 per cent, 3.5 per cent fee

Intro purchase offer: 0 per cent for 6 months

APR: 17.9 per cent

Restrictions: You must transfer within three months and have a minimum salary of £10,000. Although it's the joint second longest balance transfer card available, the fee is quite a lot higher than the Barclaycard competition. You can't transfer from other NatWest or RBS cards

Benefits: 20 per cent off at Buyagift.com and 10 per cent off short breaks with Superbreak. There is also an additional cardholder option available. 

Other top 0% transfer deals available include Tesco Clubcard credit card with BT, 0 per cent for 22 months, Halifax Credit card, also 22 months, and Nationwide Credit card, 20 months.

  More... So much for the young and financially reckless - it's the over 60s who are racking up store card debt now Prepaid debit card offering no limit on cashback - including from John Lewis - signs up 100,000 users  

Low fee 0% balance transfers

If you can clear your debts more quickly than the 0 per cent periods detailed above, you might be able to get a balance transfer card with a more reasonable fee, which will cut the overall cost of paying off your store cards.

Pick the card that with the lowest fee that still gives you a realistic timeframe for you to pay off your debt.

If you find you can't pay off what you owe by the end of the 0 per cent period, try to transfer what's left to a new 0 per cent card.

Some of the best low fee balance transfersBARCLAYCARD PLATINUM

Balance transfer length & fee: 12 months 0 per cent, 0.9 per cent fee

Rep variable APR: 19.9 per cent

Restrictions: The cardholder must transfer within 60 days and have a minimum income of £20,000

A 1.2 per cent fee is charged but a sum is refunded so that the fee effectively falls to 0.9 per cent as long as certain conditions are met. The refund is then credited to you within 28 days. Once again, you can't transfer debt from other Barclaycards.

NATWEST/RBS PLATINUM

Lowest fee for balance transfers

Balance transfer length & fee: 0 per cent for 13 months, 1 per cent fee

Rep variable APR: 17.9 per cent

Restrictions: Must transfer within three months and have a minimum income of £10,000.

This is a good offer if you can repay you store card debt more quickly.

It also only charges a 1 per cent fee if you transfer within three months.

MBNA

Balance transfer length & fee: 14 months 0 per cent, 1.25 per cent fee

Rep variable APR: 18.9 per cent

Restrictions: You must transfer within 60 days but there is no minimum income. This card has an added benefit of offering 14 months at 0 per cent on money transfers, although CHARGES A 4 PER CENT HANDLING FEE.

Click here for more of the best credit cards available for balance transfer options.


Wonga leaves dozens of victims without answers after it raids bank accounts for £30,000 to recover loans made by fraudsters

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Dozens of fraud victims who had Wonga loans taken in their names and saw their bank accounts raided for more than £30,000 have been met with a wall of silence by the lender.

This is Money has been investigating fraudulent loans taken through Wonga after it was contacted for help on 41 similar cases - but the payday lender refuses to explain how and why the fraud is occurring, or to provide proof that cases have been reported to the police.

Details of the victims have now been passed to the Office of Fair Trading and officials are now looking at the cases as part of their on-going investigation into the payday lending industry.   

Steady stream: A total of 41 readers have emailed This is Money about Wonga fraud.

Of most concern is how fraudsters manage to cash in on loans that someone else ends up responsible for, how loans are granted with seemingly minimal personal details and whether every case is being officially reported.

Most victims only became aware of the fraud when the payday lender raided their bank account to make good on its loss.

Payday loans are designed to be a short term solution to a lack of cash that can be repaid when a borrower's next pay cheque comes through – but they can come at extraordinary cost of more than 4,000 per cent APR.

The loans have attracted the attention of regulators amid reports of bad practice and loans being granted without proper checks on borrowers' ability to afford repayments. The OFT last week found widespread failures within the industry and issued 50 lenders, including Wonga, with written notice that they have 12 weeks to improve practices or risk losing their credit licence.

Wonga provides short term loans between £1 - £1,000. Its website guarantees cash in your account within 15 minutes, 24-hours a day, if applications are successful.

HOW WONGA RECOVERS DEBTS

Wonga uses a common repeat transaction method called a Continuous Payment Authority (CPA) to collect money from borrowers – which is why it takes repeated small payments from customers, adding up to the total of the loan.

When customers take out a Wonga loan they input their bank or card details, in doing so they agree to the CPA. This then allows Wonga to collect the money from their account automatically.

CPAs are also used by companies to collect payments for magazine subscriptions and insurance payments.

The cases collected by This is Money typically involve victims’ names and addresses being used to set up the loans. Wonga will not specify what other identifying details are checked before loans are granted.

Fraudsters draw the money into a bank account they can access and then input bank account details stolen from innocent victims as a repayment method on the loan.

This means that when Wonga chases the debt it takes the money from an unknowing victim.

Wonga uses Continuous Payment Authority (CPA) to recover payments from customers, this means it is able to raid the victim's account directly to recover the money. (See box). In a handful of cases victims have received a letter from Wonga chasing debts, but did not have money taken from their bank account.

Of the 41 cases This is Money has handed to the OFT, 33 had money taken directly from their bank account. 27 of these specified the amounts taken, with the total reaching £30,839. Among these, the size of the fraudulent loans averaged £1,142.

Three readers who contacted This is Money had sums of more than £3,000 taken from their accounts. In all cases victims were refunded by Wonga when the fraud was eventually resolved.

Acknowledging the information provided by This is Money, a spokesman for the OFT said: 'Lenders should have adequate procedures in place to verify the identities of loan applicants as required. Such procedures reduce the risk that loans are provided as a result of fraudulent applications, as required for anti-money laundering purposes.'

'I can’t put into polite words what I think of them’

This is Money first covered the issue in August last year when we wrote about the experience of four readers who had Wonga debts taken out in their names. Since then we have received a steady stream of emails from readers with a similar problem.

Victim: Jane Dolby had £5,000 taken out of her account by Wonga as it tried to recover debt for a loan taken out fraudulently.

Last week, we were contacted by Jane Dolby who had £5,000 taken from her account by Wonga – the biggest amount taken from a This is Money reader for a fraudulent loan.

50-year-old Jane, who lives in Berkshire, first received a letter from Wonga on Valentine’s Day demanding payment for a loan she had not taken out.

She called the payday lender and was told that she would receive no further letters. Satisfied that Wonga had dealt with the fraud she didn’t take the issue any further.

A week later she checked the joint NatWest bank account she shares with her husband to find that Wonga had taken 13 separate payments over two days totalling £5,000.

The payments had been taken out three days prior to her phone call – something that Wonga failed to spot when she called them. Jane immediately rang Wonga and was told that she needed to contact her bank as she had been a victim of fraud.

Over the next two days she called her bank numerous times and was asked to prove that she has not taken out the loan before her bank would accept it as fraud and refund her the money.

She said: ‘I have just had the worst two days of my life, trying to prove to my bank that I have no relationship with Wonga after £5000 was taken from my debit card over a two day period.

'I had a pretty low opinion of payday loan companies that prey on the vulnerable, fail to carry out proper checks and don’t care, I can’t put into polite words what I think of them now.’

BIT OF A BOOB

One of the victims was amused when he received letters from Wonga demanding payment for a loan taken out in the name Mrs Katie Price…it wasn’t so funny when £1,600 disappeared from his account after Wonga wrongly took payment for the fraudulent debt. 

Wonga's wall of silence

We have attempted to get answers from Wonga on how loans like the one taken in Jane's name are granted.

In particular we wanted to know how debts of such large amounts can be built up before Wonga acts.

There is also a crucial question surrounding how this money is being taken out of the system and whether criminals are being traced. After all, while fraudsters game the system to put in someone else's bank account for payment details, the victims are never actually seeing the proceeds of the loans. But that money must be going somewhere, to then be withdrawn and that should be traceable.

Readers also tell us that they are told they are not the victim, Wonga is, and therefore they cannot report their case to the police. We have asked Wonga for proof fraud is being officially reported and pursued.

We have asked Wonga if they can provide this information on a 'not for publication' basis so that we can avoid copycat fraudsters picking up tricks on how to carry out the offense.

Wonga has told This is Money that fraud accounts for just 0.01 per cent of the loans that it issues. It has quoted this previously and we requested an updated figure in light of the sharp increase in payday lending in recent years, but Wonga refused.

It has also said that it will only lend £400 to first-time customers and that one loan can only be 'rolled over' three times.

Payday lenders roll over loans when debtors cannot repay their whole loan in the agreed period - usually 30 days. Lenders arrange a new loan for the unpaid amount, plus interest, with a repayment date set 30 days from the start of the new loan. It means an original loan of £400 could more than double in the the space of just a few months.

Repeat borrowers are not restricted to £400 and can potentially borrow up to £1,000 with each new loan.

TAKING ONE FOR THE TEAM

Victim: Banking correspondent Lee Boyce has also received a letter from Wonga chasing debts he does not owe.

Among the emails that we have collected from readers and passed on to the OFT we also included information from This is Money’s banking correspondent Lee Boyce.

On Christmas Eve Lee opened a letter from Wonga chasing him for debt on a fraudulent loan that he had not taken out.

When he asked the Wonga press office for an explanation he was told he had been a victim of ID fraud.

The Wonga press office refused to elaborate any further despite multiple requests. He also sent a request to Information Commissioners Office which was refused

A key criticism the OFT has made of payday lenders is that firms are not conducting adequate assessments of applicants to see if they can afford loans before lending or rolling over a loan.

In guidance issued last week, the OFT said: 'Although most lenders ask for a bank statement, this appears to be mainly to validate employment or the existence of a bank account or for fraud checking purposes, rather than to assess affordability. Lenders rarely asked for more than one month’s statements.'

Wonga has claimed in the past to check 8,000 pieces of data about applicants before granting loans. But it refused to say if it checked details of applicants income and their ability to repay a loan, as happens with traditional bank loans, when they first apply, or when roll-overs are agreed.

It also would not say if it passes details of loan applicants to credit reference agencies so that other lenders have complete knowledge of a borrower's debts.

Wonga has said that it works proactively with law enforcement to ensure that fraud doesn't occur. We asked Wonga for for confirmation that instances of fraud have been reported to the police but we were refused.

In an email to This is Money, Damian Peachey, from Wonga, said: 'While we’ll always be happy to address new questions where we can, and look at any customer queries that you pass on, there are only so many times we can go over the same ground or provide official comment on the same subject.

'We therefore don’t intend to provide yet more detailed responses or comments in response to this particular enquiry, or indeed future enquiries of this nature.’



Barclaycard accused of putting profits before customers' well-being with automatic credit limit hikes

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Barclaycard has been accused of putting profits before customer's well-being by automatically increasing credit limits and running the risk of encouraging customers into further debt and unmanageable finances.

The UK's biggest credit card provider has been automatically increasing credit limits, giving customers 30 days to opt-out of the rise or else be automatically opted-in, The Times newspaper reported.

Francesca Toma, of the debt charity StepChange, said: 'Credit card debt is one of the main contributors to debt problems in the UK and we are seeing a number of cases where banks are automatically increasing credit card limits.

Enlarge   Worrying: Barclaycard, the UK's biggest credit card provider, has been accused of seducing customers into debt

'This is a serious concern because it further undermines the position of many financially vulnerable households.'

It is expected of banks to check their customers' ability to repay debt and overall creditworthiness before increasing their credit limits; they must check with a credit reference agency, consider the customer's income, financial commitments and how they have handled their finances in the past.

However, credit card providers like Barclaycard are entitled to raise credit limits at any time and, according to the 2011 bank and building societies agreed lending code, lenders must write to customers with 30 days notice and outlining the increase and the customer's right to reject it.

Ms Toma said: 'The increase of credit accelerates debt problems and pushes people into further financial difficulty.

  More... Play your cards right: The best credit cards for spending, holidays, rewards or clearing your debts The best balance transfer credit cards to help clear your debts Looking for a better bank? This is Money's five of the best current accounts Going on holiday? Best debit and credit cards to help you avoid overseas fees

'Banks should give serious thought to whether further credit is needed and crucially that customers can afford to pay their credit card debt especially in a change of circumstance such as employment, illness or relationship breakdown.'

The Times reported that Barclaycard customer William Watts, a 34-year-old with mental health problems, who has been out of work and received long term disability benefit for eight years, was given thousands of pounds of additional credit.

Warning: Charities claim that financial debt could lead to mental health problems

Due to his fragile mental state, William was more than happy to spend the £4,000 extra credit that had been gifted to him by Barclaycard which ultimately resulted in William's father Peter Watts paying a monthly interest bill of £100 out of his retirement savings to clear the debt.

Andrew Bond, spokesman for Barclaycard said the company is unable to discuss William's case but vowed that Barclaycard would never increase a customer's limit if there was any concern that it was unaffordable.

Mr Bond said: 'Customers can reduce their limit at any time and there is no obligation to accept a credit limit increase or for customers to use their full limit if they feel it may be unaffordable for them.

'We also put a lot of effort into ensuring that customers that need additional support get it.

'We have created a specialist team of advisers to help customers who may be experiencing difficulties with mental health issues and we also provide extensive credit guidance on our website including a help line for customers experiencing financial difficulty.'

Emma Mamo, policy and campaigns manager for mental health charity, Mind, explained that often financial difficulty and mental health go hand in hand.

She said: 'If you are struggling to keep control of your money, you may find that your mental health is affected.

'Likewise, if you are experiencing a period of mental ill health you may find that you get into financial difficulties. There are three times as many adults with mental health problems reporting money problems than those without.'

Due to the tough economic climate Mind are now hearing from a record number of people who are struggling with personal finances, whether they are adjusting to lower incomes and increased costs, redundancy or anxiety over losing their job. 

Ms Mamo said: 'Our infoline has experienced a surge in calls from people concerned about debt, unemployment  and welfare cuts.'


Reduced credit card bill with Asda so why still charged high interest

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We paid off the majority of the balance on our Asda card by the payment due date of March 11, so we were left with a remaining balance of just £100.

However, when we received a card bill recently we noticed an interest charge of £16.69, which we were very surprised at as surely the interest at the monthly rate of 1.876% on £100 should be £1.88.

When we complained we were told that the interest was charged on the original balance owing and not he remaining outstanding balance, and they said this was set out in the terms and conditions.  Are we being ripped off? S.B

Terms and conditions: Average daily balance information is set out in credit card T&Cs, but some people still get caught out.

Adam Uren, of This is Money, said: The first thing that should be noted is that Asda has agreed to waive the £16.69 charge on your account after it was contacted by This is Money, so you won't have to pay any interest at all for that bill.

The problem you have run into here is that you assumed that the interest would be charged on the remaining balance on the payment due date, but this isn't how interest is calculated on card debts.

Interest is calculated on a daily basis, meaning it begins to accumulate on the day you make a transaction.

If you pay off your balance in full when the bill is due, then you will not incur any interest charges.

However if the whole balance is not paid off, then typically the interest owed is calculated using the 'average daily balance' method.

  More... Applying for a credit card? You'll pay 9% more than the advertised rate for a patchy credit score My credit rating is excellent (and I've got a £1m house), so why am I not getting the best loan and credit card rates? Need a credit card? Find the best deal for you

This works by adding together the amount outstanding on your balance each day, then dividing it by the number of days in the month. The interest rate is then applied to this figure.

So while you had a remaining balance of £100 after you paid most of the balance on your billing deadline date, you only had that balance for one day of that month, with the debt much higher for the rest of it. This practice is set out in its terms and conditions.

In response to This is Money, head of Asda Money Kirsty Ward said: 'Firstly, we are very sorry for any confusion that this issue has caused to our customer.

'As is standard practice within the industry, our customers can choose to make either a minimum, full or payment of an amount in between when they receive their monthly statement.

'Interest is then charged from the date of a transaction and continues to be added until the outstanding balance on the card is paid in full.

'In this instance, the entire balance was not paid by the required date and therefore interest was added to the account from the date each transaction was made. 

'On this occasion, as a goodwill gesture we have made the decision to waive the interest.  We also do everything we can to ensure our terms and conditions are communicated clearly to our customers and it’s really important customers understand the need to pay the full balance outstanding to avoid any interest being applied.'

The best supermarket rewards credit cards: Clubcard | Nectar | M&S | Asda

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Supermarket rewards cards can help you save money – and get free stuff – simply by spending the cash you were planning on spending anyway.

Deciding on the best option for you will obviously depend on where you like to shop. But if you have a choice of supermarkets it is worth weighing up the various offers to find where you can save the most money.

The first thing to remember is that you must read the small print – while many supermarkets run a rewards scheme, all have their own system and points value.

In fact, some rewards schemes offer points worth next to nothing - a ploy used by brands to encourage shoppers to spend more, with sometimes just a few pence to show for it. So stay savvy.

Regardless, if you shop regularly at one place it is usually worth getting a rewards card anyway to ensure you are maximising your money.

Supermarket shopping: Make sure you make the most of your spending

Tesco

Tesco's reward scheme offers the best value per point.

How much are points worth?

With Tesco's ordinary rewards card, the Tesco Clubcard, you collect 1 point for every £1 spent in store, on Tesco online or for non-fuel purchases at a petrol station. You also pick up one point for every £2 spent on fuel at a Tesco petrol filling station.

Tesco's Clubcard Credit Card can help you to multiply your rewards.

You get one Clubcard point for every £4 you spend on it. One point is worth 1p if spent in-store at Tesco and 4p if redeemed using Tesco's Clubcard rewards vouchers.

These can be used for a variety of restaurants, cinemas and other entertainment venues, as well as travel, through Avios.

How does it work?

You get Tesco Clubcard Credit Card points wherever you use your card – plus normal Clubcard points when you shop at Tesco.

Because your credit card doubles as your Clubcard you don't need to swipe twice - altogether you'll get five points for every £4 spent in Tesco stores and five for every £4 spent on Tesco fuel (excluding Esso Fuel) - a pretty good deal compared to other medium-spend offerings in the market.

Points expire after two years and rewards vouchers, two-and-a-half.

Clearly, with a 16.9 per cent interest rate, you should make sure you pay the card off in full each month otherwise rewards will be quickly cancelled out.

Cardholders pay 0 per cent on balance transfers for nine months, although they do have to pay a transfer fee of 2.9 per cent fee  – and can transfer up to 95 per cent of your balance.

How about the small print?

A 2.75 per cent fee non-Sterling transaction fee applies when using your card abroad.

Points will not be awarded for some products, including tobacco or tobacco related products, lottery, stamps, prescription medicines, infant formula milk, Tesco Gift Cards, saving stamps, Esso fuel, Paypoint payments or for purchases of some Tesco Bank products. 

There are plenty of other ways you can clock up points, including Tesco Travel, Photo and Mobile.

Top offers: shoppers can rack up points using Tesco's Clubcard credit card

DON'T FORGET TO PAY YOUR BILL OFF

There is one golden rule when it comes to rewards cards, pay your bill off in full so that you don't get charged interest.

Do this and you will make sure you are reaping the rewards of savvy spending - gaining points or benefits for things you would buy anyway.

Fail to do it and you are losing the value of rewards as interest will eat into them or outweigh them - in that instance you will be playing right into the credit card provider's hands.

  More... Play your cards right: The best credit cards for spending, holidays, rewards or clearing your debts Our loans picks: This Is Money's five of the best personal loans The best balance transfer credit cards to help clear your debts

Sainsbury's

If you’re not a regular Tesco shopper, an alternative is the Sainsbury's Bank Nectar Credit Card.

How much are points worth?

You can collect 10 Nectar points per £1 on Sainsbury’s shopping (up to £1,000 a month) for the first three months.

After the introductory period you can earn four points per £1 on Sainsbury’s shopping. When you shop elsewhere you can earn one point for every £5.

The points system is a bit complicated because the figures given by Sainsbury's are the maximum you can clock up if you have both a Nectar credit card, and a Nectar Card - the supermarket's ordinary rewards card.

How does it work?

Unlike the Tesco Clubcard, the credit card does not double up as a Nectar Card so you will have to swipe both for maximum points - for example of the four points you make in every pound, two are earned using your credit card and two using your Nectar card.

The Sainsbury's rewards points system is also worth a lot less than Tesco's, which is something else to bear in mind.

A Sainsbury's Nectar point is worth 0.5p compared to a Tesco Clubcard point worth up to 4p, so one Clubcard point can be worth up to eight times more than Nectar points.

For every 500 points you'll received £2.50 off your chosen reward - so savings are minimal. Points can be used on a wide variety of rewards like days out, travel and restaurants or to help pay for your Sainsbury's shop.

In addition to the rewards the card also offers six months interest-free on purchases and 15 months interest-free on balance transfers (with a 3 per cent fee). After that, APR is 19.9 per cent.

Points differ on Sainsbury's fuel - for the first three months after opening your account you'll collect eight Nectar points for every £1 you spend plus one Nectar point per litre on Sainsbury's fuel. Again you have to swipe your Nectar card for maximum points.

After the first three months you'll collect two Nectar points for every £1 you spend on Sainsbury's fuel plus one Nectar point per litre on Sainsbury's fuel if you pay with the card.

How about the small print?

The Sainsbury's Nectar Credit Card is available to new Sainsbury's Bank credit card customers only, although existing customers of the bank may be eligible for an upgrade.

The 17.9 per cent representative APR means you should pay the card off in full each month.

Anything else?

Another option for big Sainsbury's shoppers, again an option only available to new customers, is the Sainsbury's Cashback Credit Card.

With this card you get a pretty impressive 5 per cent cashback on Sainsbury's shopping for the first three months (up to a maximum of £50 a month).

After this, spend at least £250 with Sainsbury's each month, including online and petrol purchases, plus £250 elsewhere and you'll get £5 a month, equivalent to 1 per cent cashback. You can't earn Nectar points using this card so you will need to swipe that as well.

Marks and Spencer

If M&S is more your style, it could be worth taking out an M&S Credit Card.

How much are points worth?

With M&S rewards you'll receive points every time you shop with your card - you get one point for every £1 spend in M&S and one point for every £2 you spend elsewhere. 500 M&S points are worth £5, so they may take a while to rack up, but can be used to buy most things in store.

You will also receive a bonus points voucher for 500 M&S points worth £5 as an introductory sweetener.

How does it work?

Rewards: M&S Credit Card holders are eligible for a range of offers

Your points are converted into M&S reward vouchers four times a year and posted through your door. You also earn points every time you shop with your card abroad.

Made to Measure shirts, tailoring alterations, personalised gift cards, large domestic appliances name tapes and Your School Uniform service, food to order, Lunchtogo, Wine Club, restaurants, deli bars, M&S Café and branded food goods are all excluded.

What makes this card stand out from the crowd is its travel money offering. You can buy currency with no cash advance or foreign exchange fee online or over the phone and it will be delivered to your door for free on orders of £500 or more. Delivery costs £5 for orders under £500 - still not bad.

How about the small print?

M&S Credit Card also gives you 15 months interest free on purchases, although it leaps up to 16.9 per cent after that, so make sure you pay off your balance every month to avoid paying any fees.

As an M&S Credit Cardholder, you get exclusive access to the M&S Travel Club. You could save up to eight per cent on your next holiday, on top of tour operator discounts - although this maximum saving only applied to cruises and selected tour operators.

Travel Club savings do not apply to Travel Money, Travel Insurance, ski packs, Palmair Holidays, Swan Hellenic, SAGA Cruises, Voyages of Discovery or scheduled flight only bookings.

Anything else?

M&S Credit Cardholders under the age of 70 can also choose to join the M&S Premium Club, which costs a pretty steep £15 a month, for a minimum of 12 months.

The deal includes worldwide multi-trip family travel insurance, triple points on your M&S shopping in store and online and various vouchers, which M&S believes 'could be worth up to £500'.

But to make this deal worthwhile, cardholders would have to make their money work pretty hard to reap big benefits, with the monthly fees already adding up to £180 every year.

Asda

There are no rewards points with the Asda Money Credit Card, but it does offer a decent cashback system.

What are the benefits?

You get unlimited 1 per cent cashback on your Asda shopping or petrol station spend and 0.5 per cent cashback everywhere else when you spend on your Asda credit card.

Your cashback will be credited to your account the following month - you can view your balance online and on your monthly statement. Asda has recently introduced contactless payments to make buying things with your card quicker and easier.

As an added bonus, you get free delivery from Asda's online store when you spend over £125, plus you can buy fee-free holiday money with Asda online, over the phone or at an in-store Travel Money Bureaux.

How about the small print?

There is no annual fee and you can get up to 50 days interest-free credit, as well as a 12 month 0 per cent balance transfer deal - so long as you transfer a minimum balance of £50 from an existing store card or loan within 90 days of opening the account. A fee of £2.9 per cent is charged on the balance. Interest is charged at 14.9 per cent APR.

Cashback will not be payable on any balance transfers, cash withdrawals from a cash machine or over the counter at a bank or cash provider or fees and charges.

Cashback may be suspended if you do not keep up-to-date with your account payments or if you exceed your credit limit.

WHAT IF YOU SHOP ELSEWHERE?Waitrose

Waitrose shoppers can sign up for a free myWaitrose loyalty card.

Although it is not a rewards card, it does help to cut costs. For example, everyday items from milk, apples, bread and coffee to dishwasher tablets, nappies and pet food are all discounted by 10 per cent.

The discount also applies to all frozen food until April 23 - just scan your card at the checkout and the deal kicks in automatically.

Other perks, such as one free tea or coffee a day, or a prize draw to win back the value of your months' shopping are also available.

Morrisons

Morrisons does not offer a loyalty card, but it does run a customer fuel scheme with its Morrisons Miles Card.

Once you’ve collected 5000 miles on a single card, by purchasing 500 litres of fuel at a Morrisons petrol station, you'll you a £5 shopping voucher to spend in-store.



How to get out of debt

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If your finances are in a mess, now is the time to take control. Read our ten-step guide to getting back into the black.

Worries: How to get out of debt and back into the black

Step one: Work it out

Sit down and work out exactly how much you owe and who you owe it to. Be honest or you'll only store up more problems for the future.

If your debt repayments take more than 20 per cent of your net monthly income you are entering a danger zone and must take steps to cut back.

Step two: Budget

Once you know how much you owe you can draw up a budget, including a schedule for repaying your debts. Be realistic and work out what you can afford to repay and still stay within your budget.

Step three: Be disciplined

Don't borrow any more money or take on any more debts until you have repaid what you already owe.

Step four: Watch your daily spending

Take a set amount of money out of the bank at the beginning of the week and give your card to a friend or family member for safe-keeping. That way you cannot spend more than you have in cash.

Step five: Organise your bills

Make sure you are paying all your utility bills by direct debit. It's much easier to manage as you won't have to worry about sending cheques on time and it is also cheaper as most providers offer discounts for direct debit payments.

This is probably the easiest way to cut your bills. You can do it today simply by calling your bank with the details of your energy suppliers. Or, alternatively, most energy bills enclose a form to fill in to set up a direct debit.

Step six: Switch your utility suppliers

You could save hundreds of pounds each year on your gas, electricity, water and phone bills by switching. It is best to switch your energy and phone suppliers before you set up direct debits or you will end up having to change them again. Try our cut your household bills service to see if you could save money.

Step seven: Switch to a cheaper credit card/loan

Try different providers and you'll probably be able to find a credit card or loan with a better rate than you're paying now - particularly for transferred balances on cards (watch out for balance transfer fees). But remember that these special offer rates will rise considerably after an initial interest-free period - make a note in your diary to change deals again. It's best to go for a low rate that looks stable rather than 0% for a limited period, unless you're happy to switch again in six months. Try our credit card and loan finders.

Step eight: Cut up store cards

Store cards charge by far the highest rates for credit, so if you're finding it hard to manage these debts throw away your cards now to avoid temptation.

You'll pay well over the odds for most store cards - it's better to pay cash if you can. For those items you can't pay cash for, shop around for the best deals - the market is competitive, so there are some excellent interest free credit offers around. It is also worth taking a look on the internet as many products are offered there more cheaply.

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Step nine: Sort out your bank account

If you're a customer of one of the big four - Barclays, HSBC, Lloyds and NatWest - then you're probably not getting the best deal on your overdraft or interest rates.

The rise in the number of internet banks means there is far more choice, so it makes sense to switch and take advantage of offers such as fee-free banking and lower overdraft rates. You could save yourself a lot of money just by switching to a new current account. Try our current account finder.

If you have savings, shop around for an account with the best rate or take a look at our cash Isa tables.

Step ten: Switch your mortgage

The mortgage is probably your biggest expense each month, so it's important to ensure you have the best possible deal. Speak to an independent financial adviser or a broker about your remortgaging options and if it looks like you could save money make the switch.

Remember to take into account any transfer charges from your current provider and any legal fees for switching. Weigh up the all-in cost of remortgaging before you decide if it's worthwhile, you may still find that the savings you'll make with a new mortgage will more than cover any transfer expenses. Try our mortgage finder.

And one for luck: Review protection policies

Finally, save money by switching your insurance company. You can often get cheaper car cover or mortgage protection, for example, by phoning around or looking through an online broker. It is also worth checking that you're not doubling up with some of your cover - for example, some home contents insurance policies cover your belongings while you are on holiday, so you wouldn't need this in your travel insurance. Try our insurance policy finder.

If you’ve followed all these steps and are still struggling to keep on top then you might need to get some expert help. StepChange Debt Charity can help you put together a personal budget and provide free debt advice about how to get back in control of your finances.

Sainsbury's cashback credit cards give you five per cent back at the tills

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Sainsbury's Bank has launched two 5 per cent cashback credit cards with low charges.

The Low Rate Nectar Credit Card rewards customers who shop at Sainsbury's with five times the number of Nectar points for three months. This is equivalent to 5 per cent off your bill, the supermarket says.

Following this introductory bonus, customers get 2 per cent back on shopping in store, and extra Nectar points at the supermarket's petrol stations.

Money back: Using Sainsbury's credit cards will give you significant rewards in store during introductory periods.

Its other card, called Low Rate Cashback Credit Card, gives 5 per cent cashback on Sainsbury's shopping for three months, up to a maximum of £1,000 a month.

  More... The best credit cards for spending, holidays, rewards or clearing your debts The best rewards cards for cashback, points and perks Find the best credit card deal Save on your supermarket shop: The best rewards cards for cashback, points and perks

During this time, customers who spend at least £250 at a Sainsbury's store and £250 elsewhere get £5-a-month reward on top of the cashback.

After three months the 5 per cent rate goes but the £5-a-month offer remains.

Both cards have an interest rate of 7.8 per cent for purchases and balance transfers.

Rival Santander cards pay out on spending on fuel, supermarket and department store shopping.