Clare's consumer finance advice

Every week Clare Francis, financial journalist and editor of comparison site moneysupermarket.com will offer tips and advice on all things money-related to help iVillagers make the most of their hard-earned cash. From energy bills to car insurance; credit cards to children’s savings accounts; mortgages to discount vouchers Clare will show you how to make sure you’re getting the best deal

Financial resolutions 2012

By Clare Francis on 02 Jan 2012 1108 comments

It’s that time of year when financial journalists like myself will be writing about the savings you could make by taking some time to review your finances and ensure your money is working as hard as it can for you.

This isn’t meant to sound patronising or preachy but chances are you could free up hundreds of pounds by being more proactive when it comes to your household finances.

2011 was a tough year financially as rising food, fuel and energy bills stretched the purse strings to the limit. Add benefit cuts and the weak economy into the mix and it’s easy to understand why so many people are struggling to make ends meet.

But there is some good news: inflation has started to subside and is likely to continue to fall back this year towards the Government’s 2% target and interest rates are expected to remain at 0.5% for most if not the whole year. These should help bring a bit of financial reprieve and you can boost that further by adding ‘take control of your finances’ to your list of New Year’s resolutions.

Here are some simple steps which should improve the state of your household finances:

Cut insurance costs

It’s always tempting to take the easy route and stick with the same home and car insurer each year, but you’re probably just pouring money down the drain by doing so as chances are you will be paying more than you need to for cover.

So when your next renewal letter lands on the doormat, view it as a prompt to shop around and see if you can make savings by renewing with a different insurer.

The average saving you could make on the cost of your car insurance is £372, while you could slash your home insurance premium by £127, independent research shows.

Get more from your bank

Statistics show that we’re more likely to get divorced than switch our bank and I think there are two main reasons for this: Firstly, there is a perception that all current accounts are pretty much the same and therefore it doesn’t really matter who you bank with. Secondly, people think it’ll be a hassle to switch.

So let’s bust those myths. If you’ve never switched your bank account, you’re probably earning either nothing or 0.1% on your cash. If you use an overdraft, you’re likely to be paying an annual interest rate of around 15%. However, HSBC is currently offering an interest rate of 6% for the first year (on balances up to £2,500), if you switch to its current account.

Alternatively, move to Halifax and open a Reward Account, you’ll receive £5 a month - £60 a year – if you pay £1,000 a month or more into your account.

You can even get a better deal if you regularly use your overdraft. Santander’s Preferred Account offers a free overdraft for the first 12 months. Thereafter, you’ll be paid 50p a day, capped at £5 a month. What’s more if you’re in credit, you’ll earn 5% for the first year on balances up to £250 and Santander is offering a £100 switching incentive.

For more details on these and other current account offers, visit MoneySupermarket.

And there’s also no need to worry about the transfer. Most of the main high street banks now have dedicated switching teams and they’ll do most of the work for you such as arranging for all your direct debits and standing orders to be moved over from your existing account. You’ll also probably be given a temporary overdraft in case your direct debits are transferred to the new account before your salary.

I’ve just moved my current account and it’s taken about six weeks for everything to go through – I’ve had to call a couple of companies that didn’t change the direct debit details (my life insurance provider and energy firm) but apart from that everything went through.

Don’t pay more interest than you have to

January is the month when Christmas excesses of the financial kind can come home to roost. If you covered the cost of the festive period using a credit card and can’t afford to pay it off all at once, make sure you aren’t being charged an unnecessarily high rate of interest.

A borrower with the average credit card balance of £2,069 could save a massive £272.35 a year just by switching to a market-leading balance transfer deal. This annual saving is based on a cardholder paying a typical annual percentage rate (APR) of 18.40% on a debt of £2,069 switching to a 0% credit card.

Barclaycard’s Platinum Longest Balance Transfer Card offers the longest 0% period at 24 months. Once the interest-free period ends, you’ll be charged interest on any remaining balance and the representative APR (which must be offered to at least 51% of successful applicants) is 17.9%. You’ll be charged a 3.2% fee for transferring a balance onto the card but that will be added to your debt, it doesn’t have to be paid up front.

To find out more about this and other balance transfer cards, check out MoneySupermarket’s credit card channel.

Reduce your energy bills

Switching energy tariff is one of the simplest transfers to make, yet around 15 million households have never changed energy provider. As a result they could be paying around £360 a year more for their gas and electricity than they need to.

And the thing with gas and electricity is that the product is just the same, regardless of where you get it from; there’s no need to install new pipes or wires – it’s just the price that differs.

The cheapest tariffs are online deals. Basically, this means that you manage your account online – you won’t receive paper bills, instead you’ll get an email when a new bill has been calculated and you’ll be required to provide your own meter readings (again this can be done online). Because the overheads are lower for the provider, it can charge less for the gas or electricity you use.

Many online deals will stipulate that you have to pay monthly by direct debit but again, this helps keep the cost down because the energy firm knows it will be getting money from you every month – as opposed to quarterly which is the traditional way of paying for gas and electricity. This should also be beneficial for you it avoids a shock bill.

The easiest way to find the best deal for you is to use an online comparison tool. You’ll be asked for details of your existing supplier and consumption, or the amount you currently pay, and your postcode. Once the results are displayed you can click through and apply online for the best deal. Your new provider will then arrange the transfer and will contact you to let you know when the switch will take place. At that point you’ll need to provide meter readings. It really is that simple!

Wishing you all the best for 2012 and here’s to saving lots of money!