Beat the credit crunch

There seems to be no let up in the bad news for consumers: energy prices have gone up again just in time for winter; food costs are still rising and mortgage lenders look set to hike rates again following the renewed turmoil in the financial markets over recent weeks.

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What’s more, analysts are warning that the takeover of Alliance & Leicester by Spanish bank, Santander, and the proposed merger between Lloyds TSB and Halifax Bank of Scotland could result in less competitive savings and borrowing rates going forward because of reduced competition in the market – watch our latest videoblog, UK’s first ‘superbank', for more information on this.

Against this backdrop, it has never been more important to see where you can save money: the chances are you could be quite surprised at the savings that are available.

Our experts here at moneysupermarket.com worked through the monthly outgoings of five households to see where we could save them money and the results were quite staggering. We saved the Morris’ £2,053 a year, while Annie and Daniel Price have seen their outgoings cut by £1,992 a year, and Emma Dean has saved £1,806 a year. The Graham family have reduced their household bills by £1,753 a year and the Murphys are now £902 a year better off than they were.

So how much could you save? Now’s the time to fight back and take part in moneysupermarket.com’s beat the credit crunch challenge.

Here are our top tips so you can see just how easy it is:

Shop around for a better deal
Whether it’s your energy bills, broadband, mobile phone or insurance, the chances are you could save money by changing tariff or provider.

Utilities
The six major energy firms have recently announced the second round of price increases this year – annual gas bills are now 52% higher on average than at the beginning of the year, while electricity costs have risen by an average of 28%. Yet despite the increases, most households could still make savings on their fuel bills.

If, like most households, you are currently on your provider’s standard tariff and paying quarterly by cash or cheque, you could probably save around £500 a year by switching to an online tariff and paying monthly by direct debit.

Claire and Paul Graham, who live in Cheshire stand to save £645 a year by switching from E.ON’s standard tariff, which they have been paying quarterly, to British Gas’ Click Energy 5 deal, which is paid for by monthly direct debit.

Home services
There are also big savings to be had by switching your home services provider – if you pay for Sky or cable TV, have broadband and use a landline, you could probably save hundreds of pounds a year by receiving all three from the same provider.

Emma Dean was paying £63 a month but she’s been able to cut this to £23.74 – netting her an extra £471.12 a year – by switching her TV, broadband and home phone to Tiscali.

Mobiles
Mobile phones are another area where many people could save money. Take a look at how many texts you send and minutes of calls you make and compare that with what’s included in your tariff – the chances are you’ll either be using your phone less than the allowance you’re paying for in which case, switch to a cheaper deal, or you’ll be being charged extra because you exceed your monthly allowance. The advice in this situation is also to change to a different deal – you’ll probably be able to get a tariff that suits your usage for less than the amount you’re currently paying in extra call and text charges. Annie and Daniel Price, from north Wales, were both on the wrong tariffs for their usage and they’ve managed to save £264 a year by switching to better deals.

Insurance
The other major thing to focus on is insurance. It can be very tempting to stick with the same insurer when your home or motor policy is up for renewal, but don’t – the chances are you could make significant savings by switching to a new provider, but make sure you use a comparison site to compare quotes from as many companies as possible. Recent research carried out by Consumer Intelligence, an independent research group, found that motorists could slash their annual premium by more than 30% on average, by using moneysupermarket.com, as opposed to going to the 44 leading direct providers.

Switch your current account
Changing current account provider is something that most people continue to shy away from. The majority bank with one of the big four – Barclays, HSBC, Lloyds TSB and Royal Bank of Scotland, which owns Natwest – even though Barclays and HSBC pay no interest on their standard current accounts, while Lloyds and RBS pay just 0.1%. Their overdraft rates are also high – 19.1% on average. Whether you run your account in credit or in the red, the chances are you would be better off switching accounts.

If you are always overdrawn consider applying for Alliance & Leicester’s (A&L) Premier Account. It offers a free overdraft for the first 12 months, after which you are charged 50p per day up to a maximum of £5 per month. What’s more A&L is also offering £100 to anyone who opens a new Premier account – you need to act now to take advantage of this offer however as it is only available until the close of plan on September 30.

A&L also has another great account for those who are always in credit. Its Premier Direct Account pays 8.5% on balances up to £2,500. This rate is fixed for the first 12 months, after which it drops to one percentage point below Bank rate. This means the current ‘go to’ rate is 4% - still significantly higher than the paltry rates most of us are earning.

Reduce the cost of your debts
If you owe money on credit or store cards you are probably paying more interest than you need. Look to switch to one of the many interest-free balance transfer deals that are available. For example, you may be able to take advantage of the Barclaycard Platinum card. It is offering an interest-free period on balance transfers until January 1 2010. However, this product is only available until the close of business on September 30, so you will need to apply quickly.

If you move your debt over onto an interest-free credit card, you should aim to clear the balance by the time the 0% offer ends as the interest rate will jump thereafter. The standard rate on Barclaycard Platinum is 14.9%.

If you don’t think you’ll be able to repay the debt within that time or you think you’ll be tempted to spend more on the card, consider a loan instead. You will have to pay interest, but at least you know how much it will cost and how long it will take to clear your debt. A loan may also be the best option if you have large debts.

Yourpersonalloan.co.uk, Moneyback Bank and Barclays have the lowest unsecured rates at 7.6%, 7.8% and 7.9% respectively. Central Capital is offering an exclusive rate of 7.5% on its Platinum Loan which is only available through moneysupermarket.com. However, this is a secured loan which means it is held against your property and your home may be at risk if you fall behind with repayments. It is also only available for loans above £10,000.

Don’t make unnecessary applications
If you have an application for a loan or credit card refused, it will harm your credit score. It is therefore important to apply for credit carefully. Moneysupermarket.com offers a useful tool called Smart Search which identifies the deals you have the best chance of qualifying for.

Protect your credit rating
Your credit profile details your credit history – such as what types of credit you use, how long accounts have been open and whether you’ve paid bills on time. With banks and building societies having less funds available for loans, credit cards and mortgages they have become more selective about who they lend to.

A good credit score is therefore vital - you can obtain a copy of your profile from agencies such as Equifax and Experian. Look to iron out any inaccuracies, close down accounts you don’t use, pay off loans and credit agreements ahead of time and register on the electoral roll to boost your rating.

Maximise savings returns
While living costs are on the up and the credit crunch is resulting in higher borrowing costs, savers have never had it so good. There are some fantastic savings deals around, so if you have money in a savings account check what rate of interest you are earning. If it is less than 6.5%, move your money to a better paying account.

A&L’s eSaver Issue 2 is paying 6.60%. This is the leading rate on an easy access account although you do not earn interest in any month a withdrawal is made, so if you dip in and out of your savings there are better alternatives.

The West Bromwich Building Society Stratus No Notice Account pays 6.56%, while the Kaupthing Edge Instant Access Savings Account has a rate of 6.55%. Other leading rates include Birmingham Midshire’s e-Saver Account (issue 2) at 6.52% and Bradford & Bingley’s Internet Saver 3 which has a rate of 6.51%.

For more information on the leading savings rates, read Kevin Mountford’s latest article, ‘Where to invest your savings’.

Remortgage
Even though the good deals aren’t as plentiful as they were before the credit crunch, there are still savings to be made – particularly if you’re coming to the end of your current deal and are about to move on to your lender’s standard variable rate (SVR).

Someone with a £150,000 interest-only mortgage could cut their monthly payments from £875 to £687.50 by remortgaging from an SVR of 7.0% onto a rate of 5.50%. This represents an annual saving of £2,250.

Have your say: 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. Can you 'beat the credit crunch' and 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.

Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.

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