10 Ways credit card companies make more

CREDIT card companies want your cash - and they're using every trick in the book to get it.

They're about to become even more inventive - not to say downright devious - now they've been forced to slash their rip-off penalty charges.

The Office of Fair Trading's decision to force them to cut default charges from £30 to £12 will cost banks around £300million a year, they are already looking for ways to claw that money back from you.

Free balance transfer deals, for example, are already becoming scarce. But the card sharks have a whole host of tricks and ploys to persuade us to spend more and use our cards more often.

We've rounded up 10 sneaky ways they encourage us to increase our debts...

1. CREDIT CARD CHEQUES

Thousands are sent out every year to people who did not ask for them. Royal Bank of Scotland has banned them but they are still popular with rivals. They can be used like a normal bank cheque but are more expensive. Typically they have no interest-free period and a handling charge of 2.5 per cent. Money spent on them is charged at a higher rate than normal cards.

2. FREE FLIGHTS

Incentives to take out cards are getting more attractive and free flights are among the favourites. One current offer is with BMI Classic Mastercard where you get 20,000 BMI miles - enough for a return flight to Russia.

3. INCREASED CREDIT LIMIT

Providers increase credit limits to encourage you to spend. People who keep a card for emergencies might spend a little more of a larger limit. Or consumers may splash out on a large purchase they couldn't previously afford. Banks believe that those with several cards tend to use the one with the biggest limit.

4. VOUCHERS

Some card providers offer shopping vouchers to encourage you to make that first purchase. If you take out a new Amazon credit card you'll be sent a £15 voucher for the online retailer. Providers believe you will continue to use the card for future purchases.

5. BALANCE TRANSFER OFFERS

Banks don't let you transfer your balance to a zero per cent rate out of kindness.

They are hoping you will stick with them after the zero period runs out. Most cards only offer zero per cent periods on balance transfers or purchases but not both.

So you could be charged interest if you spend on the card. Many balance transfers are now charging about two per cent.

6. CASHBACKS

These are often offered to entice consumers to take out a card. Often the deal will pay double cashback for the first few months. Morgan Stanley's Platinum card is offering triple cash-back for new customers until January 1, 2007. The card normally pays one per cent of the first £2,000 of purchases but new customers will get three per cent back - that's £60 instead of £20.

7. INSTANT CREDIT

This is a particularly common with store cards. You will be offered instant credit to spend in store that day if you sign up for their card. This is always tempting because it allows shoppers to buy more without worrying about how to pay. But store cards charge particularly high rates.

8. LONGER INTEREST-FREE PERIODS

A period when you don't pay interest on your spending can be a useful budgeting tool. But card providers make their money when you forget to switch to a new interest-free card at the end of the introductory period.

9. PARTNER CARDS

Giving your spouse a card on your account is a sure way to increase spending.

10. MONTHLY FEES

Co-op is introducing a £2 a month fee on its base rate tracker card and the ones it provides for Northern Rock. Moneyfacts says other providers are also considering this option.

HERE'S HOW TO STEER CLEAR

IF you don't want interest on your credit card, you need to pay off the bill in full each month.

Unfortunately that is not possible for many of us, so it is important to minimise the interest you have to pay and avoid any fees for late payments.

Try to transfer any existing balances on to a zero per cent deal. Some of these now charge a fee, so be careful which you pick.

The best deal without a fee is currently the Post Office Platinum card at zero per cent for six months.

If you think it will take longer to pay off the balance you are transferring, then switch to a card with a longer zero per cent balance transfer, even though this means paying a fee. Comparison site moneysupermarket.com warns that the Post Office card rate jumps to 12.9 per cent after six months.

Best 12-month zero per cent deal is the GE Money Transformation card which has a 2.5 per cent balance transfer fee.

If you don't always pay in full but are not keen to switch cards a lot, look for a card with a standard low interest rate. The best deal today is Intelligent Finance's Flat Rate Visa at 8.9 per cent for purchases, cash and balance transfers.