Money Insider: 'Best buy' bonds offer hope for savers building their nest eggs

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The Independent Online

the inflation figures that were announced this week will have come as no great surprise, but continue to make life a misery for savers, particularly those relying on the interest from their nest egg to supplement their income.

With only a few accounts paying a rate sufficient to keep up with the cost of living, more people are turning to longer-term savings accounts to secure a decent rate of return. Whilst tying your money up for four or five years may not be the best strategy if interest rates start to pick up soon, some savers will worry less about that and focus on maximising their monthly income.

For these people there was good news from the Coventry Building Society this week when it launched two "best buy" fixed-rate bonds. Savers are offered a choice of a three-year term at a rate of 4.20 per cent AER fixed or a five-year option at a table-topping 5 per cent. Both accounts can be opened in branch, online or by phone and, unlike many bonds, come with the option of monthly interest payments.

A couple of other excellent new savings accounts deserve a mention. For those aged 50 or over, Saga has launched a telephone saver and an internet saver, both instant-access accounts paying 2.75 per cent. The rate includes a 1 per cent bonus for the first 12 months, but importantly it offers the flexibility of unlimited penalty-free access to your cash.

Northern Rock grabbed a few headlines with a new branch-based regular saver account paying 5 per cent AER fixed for 12 months. The account is far more flexible than many other regular saver products and allows you to save up to £250 per month, plus it permits penalty and notice-free access to your money if you need it.

Play your cards right

interest rates on credit cards are still edging upwards even though Bank Base Rate remains stuck fast at just 0.5 per cent. So now's probably a good time to check that you've got the best credit cards in your purse or wallet as well as a back-to-basics reminder of some of the pitfalls to avoid.

The UK has seen something of a debt binge during the last 10 years, but the severity of the current economic downturn may be a stark reminder for some of us that a credit card is there to help manage our cash flow as opposed to offering a permanent extension of our overdraft limit.

Used wisely, plastic can be a cost-effective way of giving you some added financial flexibility, but if you're using it to make ends meet and you never clear your balance, you'll be wasting hundreds of pounds in the process.

There's nothing wrong with having more than one credit card, and as different cards have different strengths, it's quite feasible that you'll have at least three cards: one for balance transfers, one for everyday purchases that gives you reward points or cashback and one that's cheapest for using abroad.

How to get the best out of your credit card

* If you use a card to transfer a balance at a promotional rate, don't carry the card with you as you may be tempted to use it to make a purchase in a moment of weakness.

* Never draw cash on your credit card – interest rates are far higher than for purchases, there are no interest-free days, plus you'll pay a fee of around 3 per cent.

* Don't be tempted to use credit card cheques – rates and fees are prohibitive.

* Set up a direct debit for your minimum monthly payment – then you won't have to pay a £12 late-payment fee.

* If you have an unexpected major expense, there's nothing wrong with paying it off over two or three months, that's what credit cards are designed for.

* Paying the minimum on your statement is a mug's game – ideally, pay the statement balance in full, but if not, pay off as much as you can afford.

* If you're carrying a balance on your plastic, try switching to 0 per cent for 16 months with Yorkshire Bank and Clydesdale Bank.

* As an alternative to a 0 per cent balance transfer, you may want to consider a low-rate-for-life deal such as MBNA at 5.9 per cent APR.

* As an alternative to a 0 per cent balance transfer, you could choose a low-rate-for-life deal such as MBNA at 5.9 per cent APR.

Andrew Hagger is a money analyst at

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