Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“The cost of living is soaring, and consumers may want to try to save some cash in any way they can by making simple changes to their everyday finances. Even if the months ahead seem daunting, whether a spender or a saver, taking some time out to spring clean finances and being conscious of a budget could be invaluable.
“This month marks the second anniversary of the UK first going into lockdown, and its effect was detrimental to many consumers and businesses alike. Some were able to survive financially throughout the pandemic, but others were not so fortunate. The influence the pandemic has created on the mindset may have drastically changed how someone spends their cash today, and now planning for uncertainties is much more of a priority.
Budget on the go
“Budgeting can be done in a simple way, by drafting up a quick spreadsheet and keeping hold of bills and receipts each month. Keeping sight of how much is going out is essential to be more mindful on how much someone spends. However, according to Tesco Bank, over a third (40%) of UK adults don’t have a budget in place. There are efficient ways to start budgeting and to keep tabs on income and outgoings, such as with an app like Money Dashboard which connects current accounts, savings accounts, credit cards, and even a mortgage all in one place through Open Banking. Consumers can even set up goals and scrutinise each category that they spend their cash on to try to cut down on non-essentials, which could be wise if a household needs to cover rising utility bills.
Keeping loyalty cards at hand
“Keeping multiple loyalty cards to hand can be a bit overwhelming and it’s easy to leave one at home and only realise at the point of paying at the till. While some shoppers may take a moment to pass on their details to try to benefit from any in-store benefits, not everyone will, and therefore having loyalty cards to hand is sensible. However, a way to clear the cards clutter and avoid embarrassment through forgetfulness or card loss, would be to use an app like Stocard. This free app allows users to scan their loyalty cards to use on their phone in just a few minutes, and could help shoppers take advantage of their loyalty account.”
Automate your savings
“Saving little and often is the key to building a nest egg and there are now apps that can do this automatically. Chip is a free app that makes automatic deposits based on a user’s spending habits by connecting to a current account through Open Banking. There are other apps around too and, as it can be difficult for consumers to get into the right mindset to save, even downloading an app can be a good starting point. If someone saved £3 a day, they could accumulate almost £100 in a typical month.”
Take advantage of ISAs
“ISAs can be beneficial to savers not just for their tax-free wrapper, but those looking to save up for their first home or retirement can get a Government bonus of 25% on their investment with a Lifetime ISA. ISAs are also much more flexible than they used to be, as savers can now withdraw their cash with ISAs that fall under Flexible ISA rules, however not every provider offers this option. Savers could discover providers that also allow them to split their cash ISA savings across fixed and variable products in one place, ideal for those who want to spread their cash between easy access and lock into a higher rate. Savers may also be eligible for a Personal Savings Allowance, which allows basic rate taxpayers to take home up to £1,000 worth of savings interest tax-free each year (£500 for higher rate taxpayers), so it’s worth comparing deals away from ISAs carefully with this in mind.”
Open an easy access account as a safety net
“Easy access accounts are a sensible option for consumers looking to squirrel away a bit of cash for emergencies. Interest rates are also on the rise for these accounts, on average they return 0.30% based on a £10,000 deposit, which is the highest return since June 2020. The top rates are improving at a decent pace, and some deals now pay 1%, the highest return since November 2020 when NS&I held the top spot. In the weeks to come we may see even more top deals on the market, and due to their flexibility, savers can simply switch if they find something better.”
Switch credit card debts
“Spending using a credit card can have its benefits and protection, but shoppers would be wise to pay off their balance before interest applies if they can. If borrowers have debts hanging overhead on an interest-bearing card, moving this debt to a 0% balance transfer card can spur them on to sort out a solid repayment plan over the next few months. Consumers can even find balance transfer cards that are fee-free, such as the 22-month 0% balance transfer offer on NatWest Balance Transfer Credit Card Mastercard. Customers could save £1,190* if they were to switch a £3,000 debt from a card that charges 21.9% APR, and that’s if they planned to make a £100 fixed payment each month.”
*Credit card repayment based on £3,000 purchase, based on an interest rate of 21.9% APR, minimum fixed repayment of £100 (thereafter a minimum of 1% plus monthly interest or £5, whichever is higher) and would take three years and six months to pay back, costing £1,190 in interest over this term.
Consolidate debts or make home improvements with a low-cost loan
“As the Easter Bank Holiday fast approaches, homeowners may be looking to make improvements during their time off but may need a cash boost to do so. An unsecured personal loan would be a good option for this, depending on the scale of improvements that need to be made. Loans are also a good choice for those looking to consolidate different debts, and those looking to borrow £5,000 over three years can find rates as low as 3.4% with Novuna Personal Finance, Tesco Bank and MBNA Limited. Borrowers do need to keep in mind that these are advertised rates and, out of all successful applicants, a minimum of 51% are offered this rate.”
Remortgage and reduce monthly repayments
“Those borrowers who are sitting on a standard variable rate could save hundreds of pounds by switching to a fixed rate mortgage, but they may want to act sooner than later as rates continue to rise. Based on a £200,000 mortgage over a 25-year term on a repayment basis, the average monthly repayment on the average two-year fixed rate of 2.65% would be £912. Compared to the current average standard variable rate (SVR) of 4.61%, this would see borrowers save £212 per month**.”
**Based on a £200,000 mortgage over a 25-year term on a repayment mortgage basis. Monthly repayment on a rate of 2.65% would be £912.42, compared to £1,124.19 based on 4.61%.
Get free cash by switching a current account
“It’s quick and easy to switch a current account thanks to the Current Account Switch Service (CASS) but according to Pay.UK, 33% of consumers said it would take a lot for them to see any benefit in doing so. There are a few free cash switching incentives on offer, but these don’t last forever, and NatWest is withdrawing its £150 free cash offer in about a week’s time. Nationwide is offering switchers up to £125 and first direct is offering £150. This free cash could make a big difference to those looking for a boost, particularly as Pay.UK revealed nearly one in five feel the cost of living crisis is forcing them to seek out overdraft facilities. It is vital that consumers consider any fees and benefits the account offers first to ensure it’s the right choice for them.”
Weigh up using an overdraft versus a credit card
“If consumers run out of disposable income in the month then the most convenient way for them to borrow a bit of money over the short-term is to dip into their overdraft, but this is also one of the most expensive options. Some of the biggest bank brands charge nearly 40% EAR but there are current accounts out there with much more competitive overdraft tariffs, such as Starling Bank which charges 15% EAR. Lloyds Bank charges 39.9% EAR and the total cost for borrowing £500 over 30 days would be £13.99, compared to £5.78 with Starling Bank. Borrowers could get back into the black by using a money transfer card without paying a thing, the MBNA Limited No Fee 0% Balance Transfer Mastercard offers 12 months interest-free and charges no money transfer fee.”
Rachel Springall, Finance Expert at Moneyfacts.co.uk, said:
“The cost of living is soaring, and consumers may want to try to save some cash in any way they can by making simple changes to their everyday finances. Even if the months ahead seem daunting, whether a spender or a saver, taking some time out to spring clean finances and being conscious of a budget could be invaluable.
“This month marks the second anniversary of the UK first going into lockdown, and its effect was detrimental to many consumers and businesses alike. Some were able to survive financially throughout the pandemic, but others were not so fortunate. The influence the pandemic has created on the mindset may have drastically changed how someone spends their cash today, and now planning for uncertainties is much more of a priority.
Budget on the go
“Budgeting can be done in a simple way, by drafting up a quick spreadsheet and keeping hold of bills and receipts each month. Keeping sight of how much is going out is essential to be more mindful on how much someone spends. However, according to Tesco Bank, over a third (40%) of UK adults don’t have a budget in place. There are efficient ways to start budgeting and to keep tabs on income and outgoings, such as with an app like Money Dashboard which connects current accounts, savings accounts, credit cards, and even a mortgage all in one place through Open Banking. Consumers can even set up goals and scrutinise each category that they spend their cash on to try to cut down on non-essentials, which could be wise if a household needs to cover rising utility bills.
Keeping loyalty cards at hand
“Keeping multiple loyalty cards to hand can be a bit overwhelming and it’s easy to leave one at home and only realise at the point of paying at the till. While some shoppers may take a moment to pass on their details to try to benefit from any in-store benefits, not everyone will, and therefore having loyalty cards to hand is sensible. However, a way to clear the cards clutter and avoid embarrassment through forgetfulness or card loss, would be to use an app like Stocard. This free app allows users to scan their loyalty cards to use on their phone in just a few minutes, and could help shoppers take advantage of their loyalty account.”
Automate your savings
“Saving little and often is the key to building a nest egg and there are now apps that can do this automatically. Chip is a free app that makes automatic deposits based on a user’s spending habits by connecting to a current account through Open Banking. There are other apps around too and, as it can be difficult for consumers to get into the right mindset to save, even downloading an app can be a good starting point. If someone saved £3 a day, they could accumulate almost £100 in a typical month.”
Take advantage of ISAs
“ISAs can be beneficial to savers not just for their tax-free wrapper, but those looking to save up for their first home or retirement can get a Government bonus of 25% on their investment with a Lifetime ISA. ISAs are also much more flexible than they used to be, as savers can now withdraw their cash with ISAs that fall under Flexible ISA rules, however not every provider offers this option. Savers could discover providers that also allow them to split their cash ISA savings across fixed and variable products in one place, ideal for those who want to spread their cash between easy access and lock into a higher rate. Savers may also be eligible for a Personal Savings Allowance, which allows basic rate taxpayers to take home up to £1,000 worth of savings interest tax-free each year (£500 for higher rate taxpayers), so it’s worth comparing deals away from ISAs carefully with this in mind.”
Open an easy access account as a safety net
“Easy access accounts are a sensible option for consumers looking to squirrel away a bit of cash for emergencies. Interest rates are also on the rise for these accounts, on average they return 0.30% based on a £10,000 deposit, which is the highest return since June 2020. The top rates are improving at a decent pace, and some deals now pay 1%, the highest return since November 2020 when NS&I held the top spot. In the weeks to come we may see even more top deals on the market, and due to their flexibility, savers can simply switch if they find something better.”
Switch credit card debts
“Spending using a credit card can have its benefits and protection, but shoppers would be wise to pay off their balance before interest applies if they can. If borrowers have debts hanging overhead on an interest-bearing card, moving this debt to a 0% balance transfer card can spur them on to sort out a solid repayment plan over the next few months. Consumers can even find balance transfer cards that are fee-free, such as the 22-month 0% balance transfer offer on NatWest Balance Transfer Credit Card Mastercard. Customers could save £1,190* if they were to switch a £3,000 debt from a card that charges 21.9% APR, and that’s if they planned to make a £100 fixed payment each month.”
*Credit card repayment based on £3,000 purchase, based on an interest rate of 21.9% APR, minimum fixed repayment of £100 (thereafter a minimum of 1% plus monthly interest or £5, whichever is higher) and would take three years and six months to pay back, costing £1,190 in interest over this term.
Consolidate debts or make home improvements with a low-cost loan
“As the Easter Bank Holiday fast approaches, homeowners may be looking to make improvements during their time off but may need a cash boost to do so. An unsecured personal loan would be a good option for this, depending on the scale of improvements that need to be made. Loans are also a good choice for those looking to consolidate different debts, and those looking to borrow £5,000 over three years can find rates as low as 3.4% with Novuna Personal Finance, Tesco Bank and MBNA Limited. Borrowers do need to keep in mind that these are advertised rates and, out of all successful applicants, a minimum of 51% are offered this rate.”
Remortgage and reduce monthly repayments
“Those borrowers who are sitting on a standard variable rate could save hundreds of pounds by switching to a fixed rate mortgage, but they may want to act sooner than later as rates continue to rise. Based on a £200,000 mortgage over a 25-year term on a repayment basis, the average monthly repayment on the average two-year fixed rate of 2.65% would be £912. Compared to the current average standard variable rate (SVR) of 4.61%, this would see borrowers save £212 per month**.”
**Based on a £200,000 mortgage over a 25-year term on a repayment mortgage basis. Monthly repayment on a rate of 2.65% would be £912.42, compared to £1,124.19 based on 4.61%.
Get free cash by switching a current account
“It’s quick and easy to switch a current account thanks to the Current Account Switch Service (CASS) but according to Pay.UK, 33% of consumers said it would take a lot for them to see any benefit in doing so. There are a few free cash switching incentives on offer, but these don’t last forever, and NatWest is withdrawing its £150 free cash offer in about a week’s time. Nationwide is offering switchers up to £125 and first direct is offering £150. This free cash could make a big difference to those looking for a boost, particularly as Pay.UK revealed nearly one in five feel the cost of living crisis is forcing them to seek out overdraft facilities. It is vital that consumers consider any fees and benefits the account offers first to ensure it’s the right choice for them.”
Weigh up using an overdraft versus a credit card
“If consumers run out of disposable income in the month then the most convenient way for them to borrow a bit of money over the short-term is to dip into their overdraft, but this is also one of the most expensive options. Some of the biggest bank brands charge nearly 40% EAR but there are current accounts out there with much more competitive overdraft tariffs, such as Starling Bank which charges 15% EAR. Lloyds Bank charges 39.9% EAR and the total cost for borrowing £500 over 30 days would be £13.99, compared to £5.78 with Starling Bank. Borrowers could get back into the black by using a money transfer card without paying a thing, the MBNA Limited No Fee 0% Balance Transfer Mastercard offers 12 months interest-free and charges no money transfer fee.”
