Simon Read: We have soaring credit rates as well as shrinking savings. What can you do to make things better?
Just in time for the expected seasonal spending splurge, credit card rates have hit an 18-month high. According to rates analysts at Moneyfacts, the average annual interest rate charged by credit cards now stands at a hefty 19.1 per cent.
The bank base rate is still stuck on its record low of 0.5 per cent – a level it has remained at now for three and a half years. Meanwhile savings rates – already at pretty unappetising levels – are slipping down. Many companies have been busy pulling their best-buy deals to replace them with much more paltry returns.
In the last week, for instance, we've seen the AA withdraw its 3.3 per cent, three-year fixed rate and replace it with a 2.7 per cent deal. Meanwhile, Saga pulled its 3.3 per cent, three-year, fixed-rate ISA and introduced a 2.75 per cent offering instead.
The situation for borrowers was worsened by the slight climb in the inflation rate announced this week. It went up from 2.2 per cent to 2.7 per cent which, according to the experts at Savings Champion, left no easy access or notice accounts that beat inflation for basic-rate taxpayers.
If your savings aren't earning more than the current rate of inflation then, effectively, your cash is shrinking as its spending value is declining.
"With savings rates continuing to fall, it's vital for savers to find and track the best savings accounts for their circumstances," says Anna Bowes of Savings Champion.
The site has a helpful rate checker, which lets you know if the deal on your savings account changes. With rates so low at present, ensuring you make your nest-egg work hard is essential if you want to see it have any chance of growing.
So while a 0.6 per cent fall in the offering may not seem all that much, it's monumental bearing in mind the low returns being paid. In fact it means the returns on the AA account, for instance, have fallen by almost a fifth.
But with savers struggling to find hardly any decent returns for their cash, what about those who borrow on their credit card? They can be forgiven for thinking that they're being taken advantage of by the plastic-card companies.
But what the credit-card firms are taking advantage of is our apathy in not switching deals. In effect, anyone paying 19.1 per cent or so is funding the plethora of 0 per cent offerings that the card companies use to win new business.
Some critics have also suggested that the credit-card companies are hiking rates to recover the cost of the payment protection insurance mis-selling scandal. The total compensation bill to banks and other firms is now expected to top £15bn.
By increasing rates and charges, the banks and credit-card companies can effectively make their customers pay for their own compensation pay-outs, is the theory. The finance industry even has a name for it – the waterbed effect.
It's called that because the financial ripples caused by the compensation payouts can be evened out by the increased cash brought in by higher borrowing rates.
Oddly enough the rates on personal loans have been falling, with some lenders offering their lowest-ever deals of 5.5 per cent or lower.
Why doesn't the same thing happen with credit cards? Because the lenders know that millions turn to plastic when they've run of out cash – especially at Christmas – as it's so easy to do so.
Applying for a personal loan, on the other hand, can be a more difficult process, and there's also the risk of being turned down, especially if you're struggling. In other words, personal loans need to be sold, while the credit-card companies already have their customers signed up.
So, as with savings accounts, you should check the interest rate and switch to a better deal to save.
"If in doubt, shoppers should opt for an introductory interest-free purchase card, which gives them some breathing space so they can focus on repaying solely the amount they have spent," advises Rachel Springall of Moneyfacts.
But, back to the question I posed in the header: what can you do to make things better?
The answer, if you have savings or need to borrow, is find the best deals. It's a message that you'll find coming from every finance expert, be they money-saving or investment-based.
But it's a message that gets repeated again and again because it's clear that so many people don't bother to act upon it.
Take your heating bills. It's a fact that the difference between the best deals and the most expensive is hovering around the £300 mark. Yet some people are still paying the highest rate.
No-one can be happy to be paying over the odds, yet many do nothing about it. So if you've sorted your finances recently to ensure you are getting the best rates, check with your friends and family to ensure that they aren't being taking for a ride by their suppliers.
And if you haven't had a good look at your accounts and deals in the last few months, do so. It's almost certain that even if you took out a best-buy deal as recently as six months ago, there is likely to be better offerings around now.
And if you have a deal that's a year or more old, then it's certainty that you really are being taken for a mug with lower savings rates or higher interest charges by your bank, credit card company or building society.
Debt in Britain: Numbers seeking help on how to cope with mounting bills goes up by more than half in three years
Bargain Hunter: BT improves its mobile reception with 'incredibly competitive' deals
Offset your mortgage and save thousands
Simon Read: 'It went below the radar but you could be eligible for a tax break on your savings'
Women to lose benefits from contracted-out pension scheme
- 1 East 17 bandmember Brian Harvey in 'very desperate situation’
- 2 Germanwings plane crash: Video shows co-pilot Andreas Lubitz learning to fly as a teenager
- 3 Vladimir Putin says Russia will fight for the right of Palestinians to their own state
- 4 Germanwings crash: Captain of doomed plane was only 'on board because he changed job to spend more time with his children'
- 5 Ohio Democrat Teresa Fedor speaks out during abortion debate to reveal she has been raped – and is interrupted by laughter from Republicans
Ukip supporters are 55 or older, white and socially conservative, finds British Social Attitudes Report
JK Rowling responds to fan tweeting she 'can't see' Dumbledore being gay
Street preacher quoting from the Bible fined for calling homosexuality an 'abomination'
Jeremy Clarkson sacked live: Alan Yentob 'wouldn't rule out' ex Top Gear host's BBC return
Woman filmed launching racist tirade against men on the Tube for speaking in 'own lingo'
The West has it totally wrong on Lee Kuan Yew
iJobs Money & Business
£18000 - £20000 per annum: Recruitment Genius: A Client Services Assistant is ...
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
£32000 - £38000 per annum + benefits: Ashdown Group: A highly successful, inte...
£20000 - £35000 per annum: Recruitment Genius: This multi-award winning foreig...
Day In a Page
This four-bedroom cottage is a Grade II-listed town house, well-located for the thriving market town of Nailsworth.
A four-bedroom apartment on the ground floor of a stunning period property in North Yorkshire, with two kitchens and a large south-west facing garden.
This high-spec two-bedroom home is part of a smart collection of new flats at Beaufort Park and has a large decked balcony that's perfect for summer drinks.
Capitalise on the fabulous views of Trevone Bay by taking two homes and creating one spacious boutique B&B. Just a cliff-top walk from Padstow.
Overlooking a golf course, this six-bedroom Edwardian detached home spans four storeys and retains many period features including the original, operational servants' bells...
On the edge of the city, this six-bedroom home comes with an outdoor swimming pool and a large garage block that has annexe potential.
In a Grade II-listed manor just outside of Bath, this three-bedroom home is arranged on two floors with a skylight in a vaulted roof line.
Open the living room's bi-fold wooden doors to reveal a retro-style kitchen, and a conservatory leading to a paved garden at this three-bedroom home.
A Grade II-listed, four-bedroom home, in a charming Somerset village, with a two-storey studio that could be converted into a holiday cottage
A modern four-bedroom Victorian home, within walking distance to the high street
A luxury apartment in the Gothic mansion of Wyfold Court in Kingwood, offers six bedrooms spread over three floors and a turret
This school conversion, near Stockwell Tube, oozes New York loft style. The one-bedroom flat features double height ceilings and exposed brick work
This six-bedroom Georgian home is on three floors with open fireplaces, a two-oven Aga, an annexe, and cottage gardens with outbuildings and a car barn
High Crest House covers an impressive 9384sq ft, with almost three acres of grounds including a tennis court and summer house enclosed by electric gates
A six-bedroom farmhouse with separate accommodation in converted stables. Situated in the village of Church Aston, within walking distance to the market town
A two-bedroom flat with under-heated walnut floors and bespoke built-in storage. The Tube and Clapham Common are a short stroll away
A refurbished seven-bedroom townhouse with staff quarters, cinema room, superb gym, steam room and plunge pool
A minimnalist four-bedroom home designed to the highest spec, featuring glass walls and a kitchen space lit by a glass roof
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
A boutique mews house, set around a central courtyard, with three bedrooms and a private roof terrace
A four-bedroom farm-conversion with three bathrooms and two reception rooms
A two-bedroom detached house with ensuite bathrooms and a sun-drenched decked terrace, £750,000
A modern and spacious two-bedroom, penthouse flat with two bathrooms in a prestigious development
A beautifully renovated five-bedroom terrace with three reception rooms and a courtyard garden, £700,000
A four-bedroom period house which has been extended to provide almost 2,500sq ft of living space, £675,000
A pretty three-bedroom Georgian home with a 22ft drawing room and a master suite with a balcony, £525,000
A substanstial family home with five bedrooms and landscaped gardens in the much sought-after Branksome Park area
A well-presented three-bedroom house with front and rear gardens, close to White City station, £475,000
A handsome five-bedroom house in a sought-after location close to the city centre
A five-bedroom country home with valley views, equestrian stables and 27 acres of land, £725,000
A six-bedroom farm house with separate, detached cottages and 371 acres of land
A two-bedroom cottage with parquet floors, chunky beams and an open fireplace
A three-bedrrom flat with 2,733sq feet of living space, a beautiful private garden and 15 acres of communal grounds
A four-bedroom chalet bungalow with three bathrooms and a spacious garden, £525,000
A two-bedroom flat with an open plan kitchen and two balconies, close to Arsenal station