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.

s.read@independent.co.uk

PROMOTED VIDEO
Arts and Entertainment
Characters in the new series are based on real people, say its creators, unlike Arya and Clegane the Dog in ‘Game of Thrones’
tv'The Last Kingdom' embraces politics, religion, warfare, courage, love and loyalty, say creators
News
peopleThe Game of Thrones author said speculation about his health and death was 'offensive'
News
Justin Bieber performing in Paris earlier this year
people
Arts and Entertainment
Martin Freeman and Lauren O'Neil in Jamie Lloyd's Richard III
theatreReview: The monarch's malign magnetism and diabolic effrontery aren’t felt
Arts and Entertainment
'Molecular Man +1+1+1' by Jonathan Borofsky at Yorkshire Sculpture park
tv
News
Glamour magazine hosts a yoga class with Yogalosophy author Mandy Ingber on June 10, 2013 in New York City.
newsFather Padraig O'Baoill said the exercise was 'unsavoury' in a weekly parish newsletter
Extras
indybest
News
people'She is unstoppable', says Jean Paul Gaultier at Paris show
Sport
Alexis Sanchez and apparently his barber Carlos Moles in Barcelona today
football
Arts and Entertainment
Miley Cyrus has her magic LSD brain stolen in this crazy video produced with The Flaming Lips
video
Arts and Entertainment
In his own words: Oscar Wilde in 1882
theatreNew play by the Oscar Wilde's grandson reveals what the Irish wit said at his trials - and what they reveal about the man
News
people
Arts and Entertainment
Unless films such as Guardians of the Galaxy, pictured, can buck the trend, this summer could be the first in 13 years that not a single Hollywood blockbuster takes $300m
filmWith US films earning record-breaking amounts at the Chinese box office, Hollywood is more than happy to take its lead from its new-found Asian audience
Finacial products from our partners
Property search
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compliance Officer - Trading Firm - London

    £55000 - £65000 per annum + excellent package & bonus expectations: Real Staff...

    Senior Compliance Executive - Top Bank - London

    £80000 - £90000 per annum + competitive: Real Staffing: A highly successful Co...

    AVP Regulatory Affairs, Global Bank, London

    £40000 - £50000 per annum + highly competitive package: Real Staffing: An oppo...

    VP Operational Compliance - Global Bank

    Highly competitive: Real Staffing: VP - Operational Compliance - Global BankA ...

    Day In a Page

    The true Gaza back-story that the Israelis aren’t telling this week

    The true Gaza back-story that the Israelis aren’t telling this week

    A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
    A History of the First World War in 100 Moments: The German people demand an end to the fighting

    A History of the First World War in 100 Moments

    The German people demand an end to the fighting
    New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

    New play reveals what Oscar Wilde said at trials

    For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
    Can scientists save the world's sea life from

    Can scientists save our sea life?

    By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
    Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

    Richard III review

    Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
    Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

    Hollywood targets Asian audiences

    The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
    Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

    Grindr founder Joel Simkhai: 'I've found love on my dating app'

    Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
    Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

    Is it time to ditch autocorrect?

    Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
    10 best girls' summer dresses

    Frock chick: 10 best girls' summer dresses

    Get them ready for the holidays with these cool and pretty options 
    Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

    Westminster’s dark secret

    Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
    A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

    A History of the First World War in 100 Moments

    Dulce et decorum est: a life cut short for a poet whose work achieved immortality
    Google tells popular music website to censor album cover art in 'sexually explicit content' ban

    Naked censorship?

    The strange case of Google, the music website and the nudity take-down requests
    Howzat! 8 best cricket bats

    Howzat! 8 best cricket bats

    As England take on India at Trent Bridge, here is our pick of the high-performing bats to help you up your run-count this summer 
    Brazil vs Germany World Cup 2014 comment: David Luiz falls from leader figure to symbol of national humiliation

    David Luiz falls from leader figure to symbol of national humiliation

    Captain appears to give up as shocking 7-1 World Cup semi-final defeat threatens ramifications in Brazil