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By Julia Kukiewicz
Staff Writer
Monday, 5 May 2008
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How to Punch the Credit Crunch in the Face
In brief… 7 ways to beat the credit crunch
- Save at the checkout with 0% on your Tesco or Sainsbury’s purchases for a year.
- Get the right cards to save on holiday
- Pay off debts by transferring your credit card balance
- Switch your broadband and save
- Get a great saving account interest rate
- Get an ISA
- Earn as you spend with a cashback card
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YOU may have noticed that the economy has been going through somewhat of a bad patch lately.
That’s no reason for your finances to take to bed, though. Here’s 7 ways you can punch the crunch in the face:
1) Save at the checkout
Don’t check in at the check out.
If you shop at Sainsbury’s or Tesco save with a store credit card that offers 0% on your supermarket purchases.
The Sainsbury's credit card gives you an amazing 0% on all your Sainsbury’s shopping for a year. You also won’t pay any interest on your non-Sainsbury’s shopping for three months.
It’s a similar story over at Tesco.
The Tesco Clubcard credit card gives you 0% on all spending at Tesco for 13 months, and the same 3 months interest free rate on non-Tesco purchases.
If you usually pay on a credit card for your shopping anyway signing up to one of these cards could make you big savings, especially since that 0% also counts for purchases of big electrical items and purchases at the supermarkets’ online stores.
If you collect Clubcard or Nectar points you could save even more.
As long as you know that you can clear your balance at the end of the month and are clear about the terms of your card, this is a really easy way to save money at the checkout.
For example, make sure you remember that taking cash out at the machine is not interest free. In fact, it costs 19.95% APR with Sainsbury’s and 24.942% with Tesco.
2) Don’t get your fingers burnt on holiday
You don’t have to give up your place in the sun because of the credit crunch - there are some easy ways to save on essentials such as travel insurance and card fees.
Use some Barclaycards or the Morgan Stanley i24 credit card to purchase your holiday and you’ll get comprehensive travel insurance.
This is not to be confused with the travel accident insurance which some other credit cards provide.
This is a full and comprehensive insurance policy: annual multi-trip with the i24 card or for a single trip of up to 21 days for five people with Barclaycard.
You can also save money while you’re on holiday by getting a card which won’t charge you.
Most credit and debit cards charge around 2.5% of the amount withdrawn at an ATM with a minimum of £2.50.
Worse, some credit card issuers also charge you for using your credit card in shops.
Get a Nationwide Flexaccount card to draw money from any ATM for free, a Post Office credit card to avoid any transaction fees abroad or a Saga Platinum card for 0% commission on transactions in Europe.
Alternatively, get Abbey’s Zero credit card for absolutely no cash withdrawal or foreign transaction fees for the first 6 months.
That’ll see you through the summer.
3) Pay less interest by transferring your credit card balance
The credit crunch is not being kind to those of us with credit card debts.
Luckily, you can still transfer your credit card balance to a new card and save.
You need to have a good credit history but if you’ll be able to pay off your debts within a year or you know you’ll be on the ball enough to change cards quickly when you know your low interest deal’s going to run out changing to a balance transfer card is well worth doing.
Three of the best low interest cards are:
Egg offers a fantastic 0% on balance transfers until August 2009 – with 0% on purchases until August 2008. It charges 3% of the balance to transfer and you'll also get an additional 0% balance transfer rate for 5 months on the anniversary of your account opening in 2010 and 2011.
Virgin Money’s card offers 0% interest for a whole 15 months from the date of issue. The Post Office offer 0% for 10 months and then 5 additional months in 2008 and 2009.
Alternatively, save yourself the stress of continually jumping ship with a low interest rate that won’t run out.
The Morgan Stanley i24 credit card offers an APR of just 5.9% on balance transfers while the Barclaycard Platinum Life of Balance card offers 6.3% on transfer up to £5000.
4) Save £180 a year by switching your broadband package
According to Uswitch, Britons collectively spend £40 million pounds too much on broadband.
Make sure that you’re not one of them by doing a little research.
Broadband customers usually overpay by buying packages which offer speeds that they won’t reach or don’t need without doing enough research.
ChooseISP.co.uk’s broadband comparison tools and speed checker are easy to use and could easily save you £180 a year.
5) Take advantage of high savings rates
And you could invest that £180 in a savings account.
The credit crunch is pushing interest rates up on savings account so get a great rate now and reap the rewards later.
Alliance & Leicester, Citibank and Halifax all offer instant savings accounts paying upwards of 6%.
Icesave have just launched an amazing 7.01% gross or 6.79% monthly interest deal online.
Nationwide have a year’s fixed-rate of 6.6% on their e-saving account and Saga has launched a one-year fixed rate savings bond paying 6.76%.
6) Grab an ISA
As well as a saving account it’s a good idea to put as much as possible into an ISA.
They’re completely tax-free, give your loads of interest and are now easier to understand than ever so there are no excuses.
You can invest a maximum of £7200 per tax year: £3600 in cash and £3600 in shares or stocks. Because it’s tax free you’ll then increase the amount of interest you get by 25 – 66% a year depending on how much tax you pay.
There are two types of ISA. Cash ISAs and Stocks and Shares ISAs because well… you get the picture.
The only thing you have to decide with a cash ISA is whether to get a variable or fixed rate.
A variable rate will change as the interest rate does, and your ISA will be more like a normal savings account, you’ll be able to withdraw cash if you need to.
A fixed rate will give more security but it’ll need a 1 – 5 year commitment and your cash will be more difficult to access.
Stocks and Shares are a more risky business and a long-term commitment. Since the stock market can fluctuate there’s no guarantee of any growth on the money you invest (unlike the Cash ISA) and you won’t be able to withdraw your cash.
You can keep adding to the investment in your ISA every tax year – it’s a nest egg. One that’ll come in handy what with this whole credit crunch malarkey.
You can read more about ISA's in Lorrie Kelly's excellent and easy-to-understand Simple-as-pie Guide to Understanding ISAs.
7) Earn money back by buying every single thing with a cashback card
With a cashback card you could earn back a percentage every single time you spend.
THE American Express Platinum credit card and the Barclay Card Platinum Cashback both offer this great deal.
The American Express card offers up to 1.5% cash back annually on all purchases with 5% cash back on spending up to £4000 during your first 3 months. While, the Barclaycard offers 1% cash back in supermarkets and petrol stations and 0.5% on all other spending.
According to the office of national statistics households spend £456 a week.
So, if the average household paid for all their purchase with the American Express Platinum they’d get:
• 5% on the first three months – 5% of £5472 but the max is £4000 = £200
• 1.5% for nine months - 1.5% of £18600 = £279
• Grand Total: £479
If they paid with a Barclay Card Platinum Cashback they’d get:
• Petrol £28.60 x 52 weeks is £1487.20 = £14.87
• Supermarket £47 x 52 weeks is £2444 = £24.44
• Other Purchases £19780.80 = £98.90
• Grand Total: £138.21
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