At the beginning of last week, there was hope that we could be entering a phase of renewed stability: here in the UK the crisis at Bradford & Bingley was resolved when its savings book was sold to Santander, the Spanish bank that owns Abbey and it is about to take over Alliance & Leicester (A&L); and in the United States a Wall Street bail-out package had apparently been agreed. However, everything was thrown into turmoil when the US House of Representatives surprisingly voted against the rescue package: all of a sudden the global stock markets were plunged into a new turmoil with dire warnings that we were on the brink of a stock market crash, the likes of which hadn't been seen since 1929.
The stock market implosion seems to have been averted - for the time being at least - but what we have seen in recent days is that savers in particular are becoming increasingly nervous about the safety of their hard-earned cash, and analysts are warning that we are far from being out of the woods and that it could take up to a decade to recover from the current crisis. Watch our latest video, 'Savings turmoil' for more information on what's been happening in the savings market.
This is all pretty depressing stuff, so what can you do to best position yourself to cope with the difficult times that could lie ahead. We've come up with some top tips to help you through the turmoil.
Ensure you are protected
With the threat of redundancy mounting, you must act quickly to ensure you have suitable protection insurance in place as many policies won't pay out if you lose your job within the first six months of a policy start date.
One option is payment protection insurance (PPI) which will meet repayments if you are unable to work due to an accident, illness or unemployment. However, PPI has come in for widespread criticism due to some policies being mis-sold alongside mortgages, credit cards and loans. The Financial Services Authority (FSA) is currently considering action to deal with sales practices after the Financial Ombudsman Service claimed it was handling around 500 complaints a day about the insurance.
Nevertheless, PPI can be a valuable product that provides a safety net for your finances - something that provides valuable piece of mind in the current environment. The key is to check your situation before you apply to ensure you're not excluded by a policy's terms and then shop around for PPI from a stand-alone provider.
Another option is to take out a policy that relates to a specific product - such as mortgage payment protection insurance (MPPI) which covers home loan repayments. With our MPPI comparison tool a 30-year-old paying £800 a month on a mortgage could pick up cover for the payments plus 5% for as little as £8.15 a month.
For more information on protecting your dependants, read Rob Barnes' article, 'Is your family protected'.
Secure your savings
Following the nationalisation of Bradford & Bingley, the rescue of Halifax Bank of Scotland by Lloyds TSB and a series of banking collapses across Europe and America, there has been a surge of activity among customers looking to protect their savings. Northern Rock, which has guaranteed 100% of consumer savings since its nationalisation, was forced to withdraw its most popular accounts due to overwhelming demand (read our article 'Northern Rock pulls deals').
There are a few homes where you can protect 100% of your savings - such as Northern Rock and National Savings & Investments. The Irish Government has also moved to guarantee 100% of savings for the next two years with the big six Irish banks including those with branches in Britain, such as the Post Office whose savings accounts are run by the Bank of Ireland. Anglo Irish Bank's Easy Access Account Issue 2 pays 6.40%, one of the leading easy access rates.
Though it may be convenient to lump all your savings into one financial institution with 100% protection, you could earn better rates if you spread your money around. Savers with UK institutions have received a boost following the increase in the level of protection given by the Financial Services Compensation Scheme (FSCS). It was confirmed on Friday that the first £50,000 of savings held with any single institution (£100,000 for joint accounts) is now totally protected - up from £35,000 previously. To find out which banks are part of the same institution read our article 'Who owns who?'.
If you do have a large amount in savings it's easy to spread your money around as there are some great rates available from numerous institutions. If you have money that you can afford to lock away the AA Internet One Year Fixed Rate Savings Account is paying 7.21% while the ICICI Hisave Fixed Rate Account pays 7.20% for 12 months. If you need access to your money, there are a host of accounts paying 6.50% or more. These include the Alliance & Leicester esaver issue 2 at 6.60%, West Bromwich Building Society's Stratus No Notice Account which is paying 6.56% and Kaupthing Edge's Instant Access Account at 6.55%. Another attractive deal is Birmingham Midshires' e-Saver Account (Issue 2) which pays 6.52%. However, savings accounts from Birmingham Midshires and The AA are registered under the HBOS group, so you shouldn't opt for accounts from both as only £50,000 will be protected in total.
Repay don't spend
The extra £10 a week that you might blow on coffees and a newspaper or a few drinks, could actually halve the time it takes to pay off the balance of a credit card as Tim Moss explains in 'Avoid a lifetime of debt'.
As well as putting extra cash towards your debt repayments each month, move any existing credit card debts on to a 0% balance transfer credit card - then you will have the length of the introductory period to chip away at the balance without paying additional interest. The lengthiest 0% balance transfer deal is available from the Capital One Balance Transfer Card which offers 0% until February 01, 2010 with a 3% balance transfer fee. The Virgin Credit Card is another option at 0% for 15 months with a 2.98% fee. Both of these cards have a standard rate of 15.9%. Remember however that these deals are only available to consumers with good credit ratings - use our Smart Search tool to find deals you're likely to qualify for.
Debt consolidation is another option if you're juggling several bills. If your debts are below £25,000 then Moneyback Bank, which is owned by Alliance & Leicester, has recently reduced its loan rate to 7.8%, while Barclays too has a competitive deal at 7.9%. Again it's important not to apply for loans you simply won't qualify for as this will hurt your credit rating - so use Smart Search before you apply.
Focus on secured debts
Make a budget listing all your outgoings in priority order - at the top of the list should be your secured debts because your home will be at risk if you fall behind on repayments.
The lowest homeowner loan rate in the UK can only be found through moneysupermarket.com and is available from Platinum Loans at 7.5%. However, this is a deal for consumers with good credit ratings. If your credit rating is less than exemplary, use our Smart Search tool to find rates you might qualify for. Don't panic however, because there are competitive deals out there for people with poor credit ratings such as the loans from Norton Finance and Ocean Finance both offering a typical annual rate of interest of 15.9%.
Reduce your outgoings
You'd be amazed at how quickly small expenses can add up. For example, spending £5 a day on lunch means you're splashing out £100 a month. This could be cut down if you take a packed lunch to work instead. Also think about cutting out the morning coffee, cancelling gym memberships you never use or magazine subscriptions you never read.
Also think about how you shop. Last week we showed you how to 'save on your weekly shopping bill' and if you're planning to buy any additional goods such as electronics, entertainment products or even clothes then shop around with a comparison website to find the best deals first. You will almost certainly be able to save money by shopping online due to the reduced overheads for retailers - not to mention the money you can save by resisting the temptation that comes with trawling around the high street.
Shop around to save cash
At moneysupermarket.com we've launched a 'beat the credit crunch challenge' in which, by working through the monthly outgoings of several families, we helped consumers save as much as £2,000 a year.
You could enjoy similar savings if you take a little bit of time to shop around and find the best deals for your needs across a range of products.
For example, do you have leftover minutes and texts on your mobile phone contract each month? Or perhaps you use more than your allowance and are charged for the extra you use each time? If so you could save cash by moving to a more suitable mobile phone deal with our mobile phone comparison tool.
The same applies to a range of services. You could find a broadband deal with a more appropriate download capacity for example. Or perhaps it's time to renew one of your insurance deals and the price has risen - by shopping around you could take advantage of an introductory rate.
And even though energy prices have risen, there are still savings to be made as Scott Byrom explains this week in his article 'Cheapest fuel bills rise by £200'.
With finances so tight you should do everything you can to fight back and save some of the money you've worked so hard to earn.
Have your say: Can you 'beat the credit crunch'? Take our challenge and see if you can save as much as some of our other customers? Don't forget to let us know how you get on by posting in our community forum. How do you rate your provider? Give feedback on your experience with your savings, loan, credit card or debt solutions provider and help others decide which provider to choose.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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