The Prime Minister has met with the bosses of the country's largest banks to discuss ways of relieving the ever-tightening credit squeeze, but consumers are unlikely to see borrowing rates come down for a while yet. In the meantime, they face further increases in household bills: oil costs have hit new highs, with the price reaching $115 a barrel. Food prices also continue to escalate.
So with consumers being hit from all sides, we at moneysupermarket.com, have come up with 10 tips to help you ride the financial storm and survive the credit crunch:
1. Review your outgoings
Have a look at your bank statement and see if there are any unnecessary direct debits going out - perhaps you subscribe to a magazine or periodical that you never get around to reading or maybe you're paying for some insurance policies you don't really need.
Also have a think about your day-to-day spending. The chances are, you could make significant savings just by changing your spending habits slightly - foregoing the morning coffee on the way to work, and taking a packed lunch rather than buying a sandwich could save around £100 a month, for example.
2. Protect your credit rating like the crown jewels
Forget the iPhone. Tim Moss, head of loans at moneysupermarket.com, said this year's must-have accessory is a good, clean credit record.
Because banks and building societies have less funding available for loans, credit cards and mortgages, they are becoming more selective about who they will lend to. You therefore need to make sure your credit rating is as good as it can be in order to maximise your chances of having a credit application accepted.
There are steps you can take to improve your credit rating. Click here for more details and watch Tim Moss' videoblog, The credit crunch effect, for further advice.
3. Don't make unnecessary credit applications
If you are looking for a credit card or loan, only apply for products you are likely to be accepted for. Failed applications have an adverse affect on your credit score.
Our Smart Search tool will help you identify the deals you stand the best chance of qualifying for.
4. Watch out for credit card catches
As Steve Willey, head of credit cards at moneysupermarket.com, points out in his article The 'interest-free' credit cards that may charge you interest, anyone with debts on credit or store cards who is looking to take advantage of the great interest-free balance transfer offers available, needs to be careful.
If you owe money on a credit or store card that charges a high rate of interest, then look to move the debt over to a card with a 0% offer. However, do not be tempted to spend on that new card as well. Most providers clear the cheapest debt first, so unless the card has an interest-free period on purchases which lasts for the same length of time as the balance transfer offer, you will be charged interest on any purchases you make.
Virgin's credit card has the best balance transfer offer: you get 15 month's interest-free. If you want a card for spending as well, then go for Capital One's Platinum card, which charges no interest on purchases or balance transfers until May 2009, or the Halifax One Online Special which has a 10-month interest-free period.
5. Make money with a credit card
If you always pay your credit card off in full each month, you may think there is no need for a 0% offer as you don't pay interest anyway. But why not apply for an interest-free purchase card and then invest the money you would normally use to pay the balance off each month? That way you can profit from your borrowing.
You can earn more than 6% interest with the best easy access savings accounts.
6. Remortgage
You've probably read or heard a lot about mortgage lenders pulling deals left, right and centre and that the rates on the products that are available are rising even though interest rates are falling. While this is true, there are still good deals to be had and if you are coming to the end of your current mortgage deal, make sure you remortgage on to another product rather than moving on to your lenders standard variable rate (SVR).
The country's largest mortgage lender Halifax, has an SVR of 7%. Someone with a £150,000 interest-only mortgage could cut their monthly payments from £875 to £674 by remortgaging on to HSBC's five-year fix at 5.39%.This would save them £201 a month - £2,412 a year.
For tailored advice about your mortgage, call one of our advisers on 0845 345 5705.
7. Switch current account
Most people have never changed their current account provider and still bank with one of the big four high street banks - Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland, which owns Natwest - despite the fact their standard current accounts pay just 0.1% on balances in credit.
You may think there is little point in switching current account provider given that most of what goes into your account each month, probably soon goes out again, but every little bit helps, so it's well worth moving to an account that will pay you more interest.
Alliance & Leicester's Premier Direct account pays 8.5% on balances up to £2,500 - over a year, that could net you £210 more in interest than you would get from an account that pays 0.1%.
You should also look to move if you are regularly overdrawn to minimise the cost of borrowing. Many current account providers charge between 15% and 20% but you don't need to pay that amount. A&L's Premier Direct and Premier current accounts are interest-free for the first year. Abbey's Preferred Overdraft current account is also interest-free for the first 12-months, while First Direct's 1st Account offers an interest-free overdraft up to £250 - you pay 12.9% above that.
8. Cut your energy bills
The six major energy firms - British Gas, EDF Energy, Eon, Npower, Scottish Power, and Scottish and Southern Energy - have hiked gas and electricity prices by an average of 15% this year on the back of rising wholesale costs.
More than 60% of consumers have never changed energy provider and are still on their supplier's standard tariff. They could cut their annual bill by around £260 a year by switching to a more competitive tariff. For some the savings could be even greater.
The cheapest option is to pay by monthly direct debit and move over to an online tariff. Npower's SOL 10 product is the cheapest deal in most regions, although this may vary depending on your consumption and where in the country you live.
An easy way to find out which is the cheapest product for your circumstances, is to use a comparison site. By entering your postcode and your consumption (based on past gas and electricity bills) or spend you can retrieve quotes from all major providers in minutes.
9. Save energy
In addition to cutting your gas and energy bills by switching to a cheaper tariff, you can also save money by reducing consumption. Simple measures such as turning televisions and computers off, rather than leaving them on standby; using energy efficient light bulbs; doing your washing at 30 degrees, rather than 40; turning your heating down by one degree centigrade; and insulating your loft could reduce your annual energy costs by up to 20% a year.
10. Compare insurance quotes
The vast majority of consumers renew their home or motor insurance with the same provider year after year. Yet research from the Association of British Insurers found that the average person can save 35% by comparing quotes from five different providers. Moneysupermarket.com sources quotes from over 50 providers, to help you find the best deal.
A 35-year old driver from Bromley in Kent with a 2005 Ford Focus would pay £456 a year with Screentrade but just £233 with LV= - a saving of £223.
Significant savings can also be had with buildings and contents cover. Someone living in a three-bedroom terrace in Milton Keynes would pay £125 a year with 1st Quote, while Legal & General would charge £327.
Have your say: visit our community forum and let us know how the credit crunch is affecting you.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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