Two years ago the Office of Fair Trading (OFT) declared that default charges on credit cards were too high and suggested capping these at £12. But market analysts say that although lenders have reduced penalty charges, they have also resorted to desperate measures to recoup lost revenue including hiking rates and fees elsewhere.

In April 2006 the average purchase rate on a credit card was 14.9% but it now averages at 16.4%. According to MoneyExtra.com, this makes little difference to people that regularly pay off their balances in full but those who only repay the minimum will be hardest hit.

Anyone with a balance of £5,000 repaying just 2.5% per month will end up paying an additional £755 in interest from the 1.5% increase in purchase rates. Reports further show that credit card providers have also upped the interest rates on cash transactions from an average of 18.1% to 24.3%. In addition to this, many institutions have increased their cash advance charges.

Previously the majority of institutions charged 2% with a minimum £2 charge; now the majority charge 3% with a minimum £3 fee. For customers who are relying on cash advances to balance their monthly budget it will make a bad situation even worse. MoneyExtra.com suggests that consumers shop around for the best credit card deals to match their spending patterns. It argues that the best credit card depends on how the card is used and when balances are paid off.

For consumers with existing balance, statistics show that compared to April 2006, there are now more cards 99 compared to 82 offering 0% balance transfer deals. According to the website, previously the cards offered up to 12 months interest-free while now they offer up to 15 months.

MoneyExtra.com recommends that consumers looking for a new provider to take over their balance, should know that they cannot transfer balances between cards backed by the same provider, or which is part of the same banking group. So, for example, you wont be able to transfer your balance from Alliance & Leicester to Virgin Money because both cards are issued by MBNA.

According to the website, most deals are only available to new customers, so consumers are warned that it is best not to complete the circuit of card providers too frequently, because normally an account will need to have been closed between 12 and 24 months before the account holder can be considered as a new customer again.

Good deals for balance transfers at the moment include Virgin Money, Barclaycard Platinum, and Natwest Classic Visa which offer 0% for 15, 14 and 13 months respectively.