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Money advice: money-saving expert Martin Lewis tells you how to make your savings make money for you
By: Martin Lewis
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£2 credit reports
For the first time, £2 credit reports are available online from all three credit reference agencies. You have a statutory right to check your file for £2, but in the past it was only by post; now after a push from the last government all agencies offer it online too. Both Equifax & CallCredit give instant reports, while Experian send it after a few days. With the credit crunch still biting, everyone should check. Full guide at www.moneysavingexpert.com/creditcheck
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Martin Lewis gives you advice on your savings
If you’re a saver, I want to show you how to urgently accelerate your interest.
The big warning is for anyone with fixed-rate savings. Over half a million are due to end this month, and when that happens banks tend to shift your cash into holding accounts paying dismal rates as low as 0.%.
The irony here is many go into fixed rates for long term stability, and if you did that a few years ago you could still have been earning well over 6%.
Yet savings providers aren’t stupid. They try and get another bite at your cash when the deal ends, hoping to profit from apathy – leaving you suffering rate shock.
It’s a clever business model. They flog people a high fixed-rate account, knowing that when it ends they can pay them next to nothing for months.
So if your fixed rate’s ending or you’re simply trying to work out what to do with your cash, do sit up and take note.
Six things every saver should know
· Pay off debts before savings.
The best use of savings is to pay off expensive debts. Think of it this way, a grand in the best paying savings account would earn you about £20 a year after tax, yet owe a high street credit card the same amount and you’d pay £180 a year. Thus pay off the debts with the savings and you’re £160 per £1,000 better off.
· Should you repay your mortgage too?
This is worthwhile for many savers – on a purely mathematical basis, if your mortgage rate is higher than the after-tax rate you can earn on savings then you’ll earn more repaying the mortgage than saving.
Yet do check you are allowed to overpay your mortgage without penalties, and, remember, once the cash is in the mortgage you can’t borrow it back (unless your mortgage is flexible). So do put three to six months worth of cash aside in an emergency fund first. For a step-by-step guide. on this see www.moneysavingexpert.com/repaymortgage
This is worthwhile for many savers – on a purely mathematical basis, if your mortgage rate is higher than the after-tax rate you can earn on savings then you’ll earn more repaying the mortgage than saving.
Yet do check you are allowed to overpay your mortgage without penalties, and, remember, once the cash is in the mortgage you can’t borrow it back (unless your mortgage is flexible). So do put three to six months worth of cash aside in an emergency fund first. For a step-by-step guide. on this see www.moneysavingexpert.com/repaymortgage
· Start with a cash ISA
A cash ISA is a tax-free savings account into which every adult can now put up to £5,100 each year. If you’ve not opened one since April 6th, it’s the first place to put your cash. The current top payer is Cheltenham & Gloucester’s cash ISA currently paying 2.7% easy access, though it does include a bonus of 1.7% for the first year. For all best-buys, see www.moneysavingexpert.com/cashISAs
A cash ISA is a tax-free savings account into which every adult can now put up to £5,100 each year. If you’ve not opened one since April 6th, it’s the first place to put your cash. The current top payer is Cheltenham & Gloucester’s cash ISA currently paying 2.7% easy access, though it does include a bonus of 1.7% for the first year. For all best-buys, see www.moneysavingexpert.com/cashISAs
· Can you put money aside every month?
Much higher rates sometimes up to 5% are available in special regular savings accounts. Yet you can only put between £10 and £500 every month. The problem is there’s a limit on the cash you can save and they are only short term, usually lasting a year. Plus, after that, they dump your money in a poor-paying account, so you’ll need move it. See www.moneysavingexpert.com/regularsavings for the latest best buys.
Much higher rates sometimes up to 5% are available in special regular savings accounts. Yet you can only put between £10 and £500 every month. The problem is there’s a limit on the cash you can save and they are only short term, usually lasting a year. Plus, after that, they dump your money in a poor-paying account, so you’ll need move it. See www.moneysavingexpert.com/regularsavings for the latest best buys.
· Are you part of a couple?
If you are, and one of you pays a lower rate of tax, put the savings in their name and you’ll earn more. There’s no issues doing this between spouses, but if you’re not married and you died within a few years, there could be an inheritance tax issue. Of course there’s also the issue of ‘trust’ too.
If you are, and one of you pays a lower rate of tax, put the savings in their name and you’ll earn more. There’s no issues doing this between spouses, but if you’re not married and you died within a few years, there could be an inheritance tax issue. Of course there’s also the issue of ‘trust’ too.
· How safe are your savings?
The final thing to remember is that if you put money in a fully UK-regulated bank account you are protected up to £50,000 per person per financial institution.
However, some banks that are part of the same group, such as Halifax and Bank of Scotland, count as one institution so the £50,000 is combined, while others that are part of the same group, such as RBS and NatWest count as separate institutions. Full details of how banks are linked at www.moneysavingexpert.com/safesavings
The only other exception is that some EU banks operating in the UK are allowed to rely on their home country’s protection scheme. That means while Punjab National Bank’s UK savings have full UK protection, put money in Post Office branded savings and it’s actually run by the Bank of Ireland, its protection relies on the Irish government.
The final thing to remember is that if you put money in a fully UK-regulated bank account you are protected up to £50,000 per person per financial institution.
However, some banks that are part of the same group, such as Halifax and Bank of Scotland, count as one institution so the £50,000 is combined, while others that are part of the same group, such as RBS and NatWest count as separate institutions. Full details of how banks are linked at www.moneysavingexpert.com/safesavings
The only other exception is that some EU banks operating in the UK are allowed to rely on their home country’s protection scheme. That means while Punjab National Bank’s UK savings have full UK protection, put money in Post Office branded savings and it’s actually run by the Bank of Ireland, its protection relies on the Irish government.
The Top Savings Deals
If you’re looking to put money away right now these are the best deals...
· Top Easy Access. The AA offers 2.8% AER easy access with only £1 needed to open it. Yet this amount includes an intro rate boost of 2.3% bonus for a year, so diarise that time and ditch and switch then to keep the rate high.
I used to warn people to avoid bonuses but with rates so low at least a 2.3% bonus guarantees the interest rate can’t drop below that for a year.
The top account without a bonus is currently the Halifax Web Saver Extra which pays 2.6 %, though the rate is variable and can be changed, also it only allows one penalty-free withdrawal a year. If you already have a Halifax current account, the rate is boosted to 2.8%.
I used to warn people to avoid bonuses but with rates so low at least a 2.3% bonus guarantees the interest rate can’t drop below that for a year.
The top account without a bonus is currently the Halifax Web Saver Extra which pays 2.6 %, though the rate is variable and can be changed, also it only allows one penalty-free withdrawal a year. If you already have a Halifax current account, the rate is boosted to 2.8%.
· Top fixed-rate accounts
If you want to lock your money away, you can earn more on the top fixed-rate paying accounts. The top fixed rate online is Bank of Baroda’s Max account, if you have a minimum of £500, although to get this you must go via comparison site Moneysupermarket. The rates are 3.15% AER for a one year fix, 3.8% for two years and 4.3% for three.
Alternatively, for shorter fixes you can earn slightly more via a postal account from the Punjab National Bank with 3.25% AER for a year and 4% for two years. Both these accounts are fully UK regulated, meaning you get the full £50,000 per person protection.
If you want to lock your money away, you can earn more on the top fixed-rate paying accounts. The top fixed rate online is Bank of Baroda’s Max account, if you have a minimum of £500, although to get this you must go via comparison site Moneysupermarket. The rates are 3.15% AER for a one year fix, 3.8% for two years and 4.3% for three.
Alternatively, for shorter fixes you can earn slightly more via a postal account from the Punjab National Bank with 3.25% AER for a year and 4% for two years. Both these accounts are fully UK regulated, meaning you get the full £50,000 per person protection.
£2 credit reports
For the first time, £2 credit reports are available online from all three credit reference agencies. You have a statutory right to check your file for £2, but in the past it was only by post; now after a push from the last government all agencies offer it online too. Both Equifax & CallCredit give instant reports, while Experian send it after a few days. With the credit crunch still biting, everyone should check. Full guide at www.moneysavingexpert.com/creditcheck
£18 hotel sale
Budget chain Etap (part of Accor) has 9,000 rooms available at £18, including Manchester and Leicester. You can stay throughout the summer holidays, until 6 September 2010. Book before 5 September.
Budget chain Etap (part of Accor) has 9,000 rooms available at £18, including Manchester and Leicester. You can stay throughout the summer holidays, until 6 September 2010. Book before 5 September.
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TV money guru Martin Lewis runs the consumer revenge website MoneySavingExpert.com ; ensure you get his weekly e-mail so you’re constantly saving money.
