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Bank MPC set to hold interest rates
Economists predict the Bank of England's nine-strong Monetary Policy Committee will keep interest rates at half a per cent
Bank of England policymakers are expected to hold their course on Thursday despite data which showed the UK economy is halfway to a triple-dip recession.
Economists predict the Bank's nine-strong Monetary Policy Committee (MPC) will keep interest rates at 0.5% and continue to keep its money printing quantitative easing (QE) programme on hold as it looks to its Funding for Lending Scheme (FLS) and a recent fall in the price of sterling to boost the economy.
The Bank will meet after gross domestic product (GDP) figures showed the economy slipped back into the red in the final three months of last year, with fears last month's snowstorms will have hit output at the start of this year.
But Howard Archer, chief economist at IHS Global, said most MPC members were likely to be opposed to further QE amid heightened inflation, which stayed at 2.7% last month, after leaping from 2.2% in September, and signs the "downside risks" to the economy had been diluted by an improving global environment and reduced tensions in the eurozone.
In recent MPC minutes, the committee also looked to encouraging early signs that its FLS, which provides cheap money for the banks to lend, will provide a boost to the economy.
Previous warnings that the appreciation of sterling between mid-2011 and mid-2012 was a potential "headwind" to the ability of UK exporters to benefit from the rebound in global growth will have been calmed by recent sharp falls in sterling over fears the UK will lose its AAA status.
There have also been recent signs of improvement in the manufacturing sector with the latest Markit/CIPS purchasing managers' index (PMI) showing that output from the manufacturing sector rose last month at its fastest pace since September 2011.
But the committee will meet on Thursday amid growing calls to increase interest rates, which have been held at 0.5% since March 2009.
Minutes of the Shadow Monetary Policy Committee, which meets at the Institute for Economic Affairs, will on Monday call for a 0.25% rise for the first time since September 2011. Some members see the recent strong performance in the markets, including the London FTSE 100 Index which recorded its strongest January since 1989, as an opportunity for the Bank to act without alarming investors.
But Mr Archer said: "The Bank of England certainly isn't going to raise interest rates anytime soon given the economy's extended weakness and limited recovery prospects." He said the Bank was likely to retain the view that taking interest rates any lower than 0.5% could damage bank margins and lending ability.
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