24 Dec 2009
Forget drinking less or promising to go to the gym. If you really want to make 2010 a good year you’d be a lot better off making financial resolutions. Here are a few suggestions.
1. Dump your bank manager
If there is one lesson to take away from 2009, it is that banks don’t care about customer welfare – so don’t think loyalty pays. It doesn’t. That means that if you want the best bank account on the market – or even an adequate bank account – odds are you need to switch. Almost all the most rewarding offers are exclusive to new customers.
The best account available for those who are always in credit is Halifax’s Reward Current Account. It pays you £5 a month regardless of how much money there is in your account. Given that most current accounts pay little or no interest, this is very good indeed. The only requirement is that £1,000 is paid into the account every month.
But don’t choose that account if you regularly go into the red – dip into your arranged overdraft by any amount up to £2,500 and you’ll be charged £1 a day. Go into an unauthorised overdraft and you’ll be charged a very hefty £5 a day, so you could easily lose in a day what you have earned in a month.
If you need an overdraft facility, go for Alliance & Leicester’s Premier Direct Current Account instead. The overdraft is completely free for the first year; after that there is a 50p a day charge, capped at £5 a month. Again, given the extortionate rates lots of banks charge, that’s pretty good. Also nice, if short term, is the fact that if you are in the black you’ll earn a very impressive 6% interest for the first year on balances up to £2,500.
2. Get a good credit card
If you have some debt on your credit card and aren’t going to be able to pay it off straight away, get a 0% balance transfer credit card deal. The best deal around at the moment is Virgin Money’s credit card which offers 0% on balance transfers for 16 months. Get the card and then pay off as much as you can each month.
But don’t use the card for purchases. All credit cards – except for those issued by Saga and Nationwide – operate a negative payment hierarchy. That means the debt accruing the least interest is paid off first. So, if you buy something on your balance transfer card, that amount will sit earning interest (at whatever outrageous rate the company normally charges) until all of the balance transfer is paid off. If you must spend more on credit, get a new card for purchases.
3. Make the most of your Isa
The opportunity to save your money without having to give any of your gains to the taxman is not one to be missed. Every year you can save up to £7,200 (rising to £10,200 in April) tax-free in an Individual Savings Account (Isa). It doesn’t sound like much, but if a married couple had made full use of that amount every year since Isas were launched in 1999, they would have sheltered £160,000 from tax. So get on it.
For more details on why saving into an Isa might well be better than saving for a pension see this article from last week’s MoneyWeek magazine: The truth about pensions: it’s not worth having one (if you’re not already a subscriber to MoneyWeek, you can claim your first three issues free here).
The best available cash Isas (you can put a maximum of £3,600 cash in an Isa rising to £5,100 in April) right now are Chesham Building Society’s and Newcastle Building Society’s 120-day notice Isas, which both pay 3% interest.
4. Switch energy provider
Finally, the quickest and easiest way to cut your outgoings significantly is probably to switch energy providers. The average electricity and gas bill is £1,200 a year, but shop around and you could whittle that down to £886 on the cheapest online tariff, says Martin Lewis on MoneySavingExpert.com. That’s an extra £314 in your pocket each year.
To find the best energy deal for you, visit a comparison site such as Uswitch.com or Moneysupermarket.com. You then enter some information about where you live and what your average energy usage is, and they’ll show you the cheapest deals, and even help you switch. Or, if you click through to the comparison sites from MoneySavingExpert.com, you can also earn some cashback or freebies when you switch.
Make these four changes now and your finances will be looking much better in 2010.