After years of putting everything on plastic, consumers are desperate to get back in the black. Cutting up credit cards and paying off loans has become the top priority as recession looms, according to a survey by PricewaterhouseCoopers, the accountant.

However, it is easier said than done. Despite our best intentions, the amount of unsecured debt continues to rise. Britons have an average of £4,570 on credit cards and £8,159 in other unsecured debt, such as loans or store cards, according to a survey by unbiased.co.uk, the financial adviser directory. And the amount owed is expected to rise as families resort to borrowing to fund Christmas.

Debt charities advise those who are overwhelmed by debt to make secured debts, such as mortgages, the top priority. Credit cards, store cards and personal loans are “unsecured” because a borrower's house or belongings are not put up as collateral.

However, there has been a sharp increase in the number of charging orders awarded by courts to secure unpaid credit card or loan debts against a debtor's home. In the worst cases, this could result in repossession. The number of charging orders issued rose from 49,000 in 2005 to 97,000 last year. This year's figures are expected to be even higher.

Beccy Boden-Wilks, of National Debtline, the charity, says: “Essential bills are still top priority, but it remains important to contact your credit lenders and pay whatever you can afford. If a lender is unhappy with the amount that you offer and threatens to apply for a charging order, seek advice as soon as possible.”

At a time when household finances are being stretched and providers of credit are trying to boost their margins, it is more important than ever to keep tabs on your unsecured debt.

Credit cards

Last week the Government held talks with the biggest card issuers over complaints that companies were increasing rates or closing accounts with little notice. The average credit card rate has risen from 16.6 per cent a year ago to 17.2 per cent, says the financial website Moneyfacts.co.uk.

Meanwhile, credit reference agencies have given warning that a new data-sharing initiative between card companies could thwart borrowers who move their balances to take advantage of 0 per cent deals. Card companies have agreed to exchange details such as the rates that consumers are paying on other cards, the total balance and whether the minimum payment is made each month.

Graham Lund, of Callcredit, one of the three credit reference agencies, says: “This initiative shows that lenders are looking for greater insight into their customers' levels of debt.”

Borrowers struggling to be accepted for a new card should make sure that their credit reports are up to date. Any blemishes will lower credit scores and can harm the chances of an application being accepted. Tim Moss, of Moneysupermarket.com, the comparison website, says: “It is unlikely that mainstream providers will accept your application if you have missed mortgage repayments or have a county court judgment against you, so it is better to go straight to companies that target your risk level. It pays to do your research first so you do not find yourself applying over and over again.”

The Virgin Money MasterCard currently has the longest introductory period on balance transfers, with 0 per cent for 16 months, 0 per cent on purchases for six months and a standard APR of 16.6 per cent. =

Loans

It is not only credit card rates that are climbing. Despite successive cuts in the base rate, average personal loan rates have jumped from 7.92 per cent to 8.46 per cent in the past two months, adding about £250 to the cost of a £15,000 five-year loan. To make matters worse, it is tougher than ever to obtain a personal loan.

Many borrowers will consider the option of consolidating their debts, but Ms Boden-Wilks says: “Do not borrow more money to pay off debts without thinking very carefully about what you can afford. If it is your only option, speak to a debt adviser first.”

The best rate on a £5,000 loan over three years is 7.8 per cent from yourpersonalloan.co.uk.

Store cards

High street retailers have drawn heavy criticism for the interest rates on store cards. Argos, in conjunction with the sub-prime lender Provident Financial, introduced its Easy Shop card last month, charging an APR of up to 222 per cent. Burton, Dorothy Perkins and Wallis all charge 29.9 per cent on purchases with their cards.

Louise Bond, of uSwitch.com, the comparison website, says: “The worst thing to do is rack up debt on so-called easy credit that carries an extortionate APR. There are a number of competitive 0 per cent credit card offers in the market and consumers need to shop around for the best deals. People must be able to repay the debt accrued over the Christmas period in the most economical way possible.”

How to maintain a spotless record

In the current financial climate, banks and building societies are increasingly nervous about lending to customers who have an imperfect credit history. Even a missed mobile phone payment could count against you when your lender is considering you for a loan.

You can obtain a copy of your credit report from one of three credit reference agencies - Experian, Equifax or Callcredit - either online or by paying £2 for a copy through the post. Alternatively, Checkmyfile.com gives you unlimited access to your reports from all three for £17.55 a quarter.

If you find an error on your report, you should write to the credit agency, saying what you want to change and providing supporting evidence, if it is available. The agency will flag this item as “disputed” and consult the company that provided the information.

Close down any unnecessary accounts to improve your overall credit score. Make sure that you are on the electoral roll and your address details are up to date.

CASE STUDY: Card limit cut without warning

John Newbould runs three nurseries in County Durham. Last month he received a call from a supplier to warn him that an order for fresh meat and vegetables would not be delivered because he had reached the limit on his credit card. It meant that Mr Newbould had nothing to feed the 74 children in his nursery in Rushyford, aged between 3 months and 5 years.

Mr Newbould, pictured with some of the children at the nursery, could not believe that he was anywhere near the limit on his Asda credit card, until he found out that the limit had been reduced by the card issuer, GE Capital, from £2,000 to £900, without warning a week earlier.

The 54-year-old says: “It caused me huge problems on the day. We finally got the order paid, but the food turned up almost five hours late. I have a good track record with Asda and I have never missed a credit card payment and always pay on time.”

GE Capital said that it had cut the limit because Mr Newbould had been the victim of attempted card fraud on his M&S More credit card in August.