These days everyone seems to be offering a credit card. You can apply for credit not only from your bank, but also from Marks & Spencer, John Lewis and even your favourite football club. But when you look behind the brand on the card, who is really lending the money?

The store, club or building society that has issued the card is usually outsourcing its customers. That is, the credit card business is sold to larger banks and providers, such as MBNA and Capital One, which are based in the US. Borrowers who have a Monument or Sky credit card are customers of Barclays, while HSBC is behind John Lewis and Marks & Spencer.

Mark Dampier, of Hargreaves Lansdown, the independent financial adviser, explains: “When your credit card is outsourced, your relationship is with the card company. This means that the provider, not the company whose name appears on the card, decides whether to charge you a fee and what interest rate you get. The customer would not know the difference when filling out the application form, but turn it over and the provider’s name is on the back.”

Abbey was the biggest UK bank to outsource its credit card operations, selling its customers to MBNA, which has 12.5 per cent of the UK market, behind Barclaycard and Royal Bank of Scotland, which owns NatWest. But after Abbey was bought by Santander, the Spanish banking group, it decided to bring its credit card operations back in-house. It is a tough time for Abbey to reenter the UK market, with providers jostling to come up with competitive deals before the Christmas rush.

The bank also faces the challenges of wooing its own current account customers who have credit card accounts with MBNA. Customers who took out a credit card through Abbey before July will now have to take the trouble to switch to ensure that they are borrowing with their bank rather than MBNA.

Roger Lovering, managing director of Abbey credit cards, says: “Our customers already have a credit card in their wallet. They are being well served at the moment, so us turning up and saying ‘we now do one’ isn’t good enough. We have to give people a reason to switch.”

Abbey’s chief weapon is an eye-catching “revolving” cashback deal previously unseen in the UK. It reimburses shoppers 5 per cent of their spending on groceries until January 31, up to a maximum of £50. When the offer is due to expire Abbey will unveil a new “inducement”, which may be cash for petrol purchases or a longer balance-transfer period. Mr Lovering adds: “Our trick will be to keep the offers fresh and innovative so that the card stays front of wallet.”

The Abbey card also offers 0 per cent interest on balance transfers for twelve months and 0 per cent on purchases for three months. Thereafter it charges an annual percentage rate (APR) of 15.9 per cent.

Lisa Taylor, of Moneyfacts, the comparison website, says: “They had to do something a bit different and set themselves apart to regain a slice of the credit card market. They have succeeded with the highest cashback offer, at 5 per cent, but it is restricted to spending on groceries.”

By comparison, Capital One offers a 4 per cent cashback on all purchases for the first three months, and 1 per cent after that if you apply through money-supermarket.com, the comparison website. Like Abbey, it has an APR of 15.9 per cent. Another alternative, the Egg Money card, offers a 1 per cent flat-rate cashback, capped at £200 a year. Spending £20,000 on the Capital One card would earn a £350 cashback in the first year, while spending the same amount on the Egg card would earn you £200.

Banks and credit card providers are also competing to offer the best 0 per cent balance-transfer periods. Capital One has the longest period – until February 2009, equal to 16 months if you sign up now – but it charges a fee of 3 per cent of the balance, compared with Abbey’s 2.5 per cent fee.

Rob Kenley, of moneysupermarket, says that switching to a card that charges 0 per cent interest on balance transfers can be a way to get back on top of your finances. Mr Kenley says: “If you have built up debts on several credit cards you are likely to be paying as much, if not more, in interest every month as you are on the balance itself. By transferring the balance to a 0 per cent card, your repayments can go directly towards the balance you owe instead of towards interest payments.”

However, borrowers should take note that the best 0 per cent transfer offers are available only to those with good credit ratings. If you are not sure what your credit rating is, you can request a copy of your profile from a credit reference agency such as Equifax.

How to benefit from 0 per cent balance transfers

Clear your balance within the interest-free period. Banks make money from balance transfers when the 0 per cent period ends and the interest rate jumps as much as 15 per cent. Make sure you have paid off your balance before this happens.

Prioritise paying off your card balance. Draw up a budget and stick to it. One way to do this is to withdraw an amount in cash at the beginning of the week so you know what you have to spend.

Keep separate cards for your debt and purchases. When you make repayments, items with the lowest interest rate are paid off first. Avoid spending on your card after you have transferred your balance.

Cut up your other cards. The danger of taking out a new credit card is that you may soon have double the debt. Philippa Gee, of Torquil Clark, the financial adviser, says: “Cards are not an excuse to go on a spending spree.”

CASE STUDY

Penny Grossman, of Pinner, northwest London, has decided to take out Abbey’s new card. The 52-year-old office manager, left, already has several other credit cards but was tempted by the offer of a 5 per cent cashback on her groceries purchases.

Ms Grossman, who also has a current account with Abbey, uses her credit card mostly when shopping at the supermarket, buying petrol and topping up her Oyster card when she travels to work in London.

“The cashback is definitely a bonus,” she says, “as I usually put my supermarket shopping on my credit card. I like it that Abbey is going to change its offer after Christmas. It would be helpful for me if it gave a cashback on the money I spend on public transport each day.”

Philippa Gee, of Torquil Clark, the financial adviser, says that it is easy to lose track of your debt when you own several credit cards.

“Taking out a credit card is not a subsitute for being responsible with money. When you receive your new card you should physically cut up your old one,” Ms Gee says.