Lesson 1: Switch your current account
Many of us are loyal to our current account provider, even if they offer us nothing in return for our fidelity. However, now that the seven-day switching service is in operation there’s no reason not to switch, particularly as there are many enticing offers out there. For instance, some accounts pay up to 5 per cent in interest, albeit with some funding restrictions – a rate that easily beats the best savings accounts.
- Best buy: TSB’s Classic Plus pays 5 per cent on balances up to £2,000. £500 monthly funding required.
Lesson 2: Balance transfer deals
If the summer holidays have taken a toll on your credit cards and you're unable to pay off your balance in full, it may be worth considering a balance-transfer deal. There are currently 13 deals on the market with absolutely no balance-transfer fees, meaning you can move your debt at no cost. However, the balance must be repaid before the introductory deal ends to avoid interest adding to your bill.
- Best buy: Santander’s 123 MasterCard offers 0 per cent interest for 23 months and there's no balance-transfer fee.
Lesson 3: Current account money transfer
With the average authorised overdraft rate standing at 15.76 per cent EAR, it’s unsurprising that relying on your overdraft can become a costly affair. A more cost-effective option could be to use your credit card to top-up your balance: a handful of credit cards allow customers to transfer funds straight into their bank account for a small fee, and if this is done with an introductory offer, customers can benefit from even greater cost-effectiveness. However, borrowers must always pay off their credit card balance in full by the end of the deal to make this a worthwhile solution.
- Best buy: The Virgin Money Balance Transfer Card offers 40 months interest-free on both balance and money transfers. There is a one-off transfer fee of 2.99 per cent on balance transfers and 4 per cent on money transfers.
Lesson 4: Look at cashback and reward cards
Cashback and reward cards are a great way to earn tax-free cash and rewards on your everyday spending. Some cards offer excellent introductory deals, which are great for those with a big purchase in mind or who are looking to benefit from their Christmas spending. However, if you don’t spend during the introductory period, you will lose out, so this will best suit regular card users.
- Best buy: Asda Money Credit Card MasterCard offers 1 per cent cashback on Asda supermarket and Asda petrol transactions, and 0.5 per cent on all other transactions.
Lesson 5: Set up a regular saver for next summer
If the summer holidays take you by surprise each year, why not prepare for the cost of next summer with a regular savings account? By setting up a direct debit from your current account you can easily build up a sizeable pot. Regular savers often trounce other flexible savings accounts: the average rate paid on a regular savings account is currently 2.27 per cent, which dwarfs the 0.67 per cent paid on the average easy-access account.
- Best buy: Nottingham BS Special Saver Issue 4 offers 4 per cent interest on balances of £1 until October 31st, 2016. No withdrawals allowed during the fixed period.
Lesson 6: Opt for a fixed-rate mortgage now
If you are currently sitting on your standard variable rate (SVR) or are coming to the end of a fixed-rate deal, now is the perfect time to look for a better offer. Mortgage rates are currently at all-time lows, so borrowers can save a significant sum by opting for one of these low-priced deals. In fact, by opting for the average two-year fixed rate of 2.81 per cent instead of staying on the average SVR of 4.84 per cent, you would be £1,996.56 better off after just one year.
- Best buy: Yorkshire BS is offering a 1.16 per cent fixed-rate mortgage to October 31st 2017 on 65 per cent loan to value (how much you owe in relation to how much your property is worth). Fees £1,657.
Thanks to teacher Ms Nelson at Moneyfacts for sharing her lessons!