How to make your money work harder for you

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The Independent Online

We all know how volatile the economy is at the moment. Talk of a double dip recession abounds and who is to know what painful effects the Government's spending cuts will have on the pound in your pocket. As for personal finances these are under acute pressure with savings rates at an historic low, loans often difficult and expensive to come by and deals appearing and disappearing again in the blink of an eye.

Against this backdrop it's important to be on the look out for the very best deal, have your wits about you; what topped the best-buy tables even a few weeks ago may now be an also ran. But don't give up hope, there are deals out there to be had, here's a guide to some of the best ways to make your money work a little bit harder for you.

Get paid by your bank

At present, most banks are offering extremely low or no interest on their current accounts. But that doesn't mean you can't make a bit of extra cash out of your monthly pay packet. Rather than searching for an account paying a favourable interest rate, there are a number of accounts with cashback incentives. Santander offers £100 to new customers to switch to the In-Credit Rate Account and First Direct also offers £100 to open a First Account. However, there are exclusions with both accounts related to minimum monthly deposits and existing customers. Likewise, Halifax pays Reward Current Account customers £5 every month they deposit more than £1,000.

If you're tempted by a fee-charging account offering supposedly better service and a few extras, the Co-operative Bank is offering a 12-month free trial on its Privilege and Premiere accounts. Currently costing between £9.50 and £13 a month, the Co-op claims the accounts offer benefits worth more than £600 and £800 annually respectively. If you are thinking of applying, the offer ends on 20 November.

Don't fall into the overdraft trap

True, cashback offers could be attractive for those who remain in credit on their current accounts. However, it could be a mistake to be blinded by the promise of cashback if you routinely go overdrawn. For instance, Halifax's tempting £5 per month becomes much less palatable once you factor in overdraft fees. Authorised overdrafts cost one or two pounds a day but unauthorised overdrafts cost £5 per day. If you know you will slip into the red from time to time, you could opt for Santander's Preferred Overdraft Rate Account and get an overdraft at 0 per cent for 12 months. With this account you can get an overdraft of up to £5,000 depending on your circumstances.

Be a regular savings switcher

Make no bones about it; the situation is pretty bleak for anyone who wants to build up a nest egg. Although options may be limited, there are nevertheless a few profitable avenues remaining. There are numerous accounts which pay an introductory bonus, normally for six or 12 months, which will beat the Bank of England interest rate. One word to the wise, though: at the end of the bonus period switch to another provider otherwise you will start to receive a much lower rate of interest.

Review your debt

Rather than giving equal attention to all your debts, you might want to think about "snowballing". Using this technique, you concentrate your efforts on paying off one of your debts – obviously it's wise to choose the debt with the highest APR. In the meantime, you make the minimum repayments on other debts.

As soon as you have paid your first debt, turn your attention to the next and keep going until you're debt free. This approach could help you feel you're making more headway with your financial problems as your creditors start to decrease in number.

Are you using all your credit cards?

As well as securing the credit cards for your borrowing habits, it could also be a good idea to get rid of those you aren't using.

Even if you don't have debt on a card, it could nevertheless have a damaging impact on your financial health. If you apply for credit, referencing agencies take into account the amount of credit you can currently obtain.

The greater the unused credit, the more potential you have to rack up debts. A card that has been sitting unused in your wallet for years could prevent you from obtaining a card with an attractive 0 per cent introductory offer in the future.

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