How to recession-proof your finances The effects of credit on the recession

Credit costs have increased

The shortage of credit has been the main factor in triggering a recession.

You may have seen the interest rates on your credit cards go up dramatically, or be finding it more difficult to get a loan, so in the recession it's more important than ever to arm yourself with all the product information available and make sure you know what's on your credit reports.

The cost of borrowing using a credit card or unsecured loan has increased

The average interest rate charged for borrowing on a credit card in January 2010 was 16.9%, but it was 16.1% in April 2008.

Some card providers are also hiking rates for existing customers with no credit problems.

The average interest rate charged for personal loans of £5,000 over three years increased from 9.74% in April 2008 to 13.59% in January 2010. For £10,000 loans over five years it rose from 8.15% to 9.15%.

Recession-proof action 

Visit our and Best Rate personal loans pages for the latest Best Buys. If you think any of your credit card rates have been increased unfairly, complain to your card provider, and then the Financial Ombudsman Service (FOS) if you’re not happy with its response.

There are now fewer credit cards to choose from

There are fewer credit card products on offer than there were in April 2008, making it harder to get credit.

We were able to analyse 244 credit cards in April 2008 when compiling the Which? Best Rates, but in January 2010 we could only analyse 207.

Recession-proof action 

If you are turned down for a credit card, ask the lender why. Get your credit reports from all three credit reference agencies – Callcredit, Equifax and Experian – for £2 each, to check whether the information on them is correct.