Money Insider: Better savings rates start to emerge

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The Independent Online

there are two sides to every story, and that's certainly the case with interest rate movements I've witnessed over the last month or so.

A surge in swap rates has already seen most lenders increase the cost of borrowing on their fixed rate mortgages, some by as much as 0.4 per cent, as the threat of a base rate rise seemingly draws ever closer. While that's bad news for those borrowers who were hoping rates would fall further and may now have missed the bottom of the rate cycle, I've started to see some evidence of increased swap rates having a positive impact on the savings market.

It's been a long time since savers have had much to smile about, but it may be that the tide is slowly starting to turn in their favour. In the two-year fixed rate bond market for example, a new 3.85 per cent deal from BM Savings hit the top of the best buys and is the highest two year rate that I've seen since last May.

If it's instant access savings you prefer, there are better deals here too, with AA Savings Internet Extra now paying an improved 2.8 per cent (including 2.3 per cent bonus for 12 months) and BM Savings has significantly raised the rate on its e-Saver to 2.78 per cent AER, and refreshingly there's no introductory bonus or withdrawal restrictions with this account.

Pack the right plastic when travelling abroad

With the Easter holidays approaching I thought it was time for a quick reminder on the do's and don'ts when using plastic overseas. While our cards offer a secure and convenient way to pay for holiday spending, the associated fees and charges can vary considerably, so it's worth getting to grips with these before you travel.

If you use a credit card abroad you'll need to bear in mind that the majority of providers will add on a foreign loading fee to all cash and purchase transactions. In most cases these charges are around 2.75 per cent to 2.99 per cent, however there are a few cards offering a better deal.

Remember that on top of this there are credit card cash withdrawal fees, as in the UK. Most will cost you around 3 per cent with a minimum £3, so a credit card cash withdrawal of £100 can easily set you back a combined charge of around £6.

The Zero card from Santander, Halifax Clarity credit card and Sainsbury's Gold card (£5 monthly fee inc comprehensive travel insurance) don't charge any loading fee on purchases or cash transactions and are free of ATM withdrawal fees too.

Most of us take our debit card for granted, particularly as it doesn't cost anything to use while in the UK. However it is a different matter when you use it abroad and something that travellers can sometimes overlook, until their bank statement hits the doormat and then it's too late.

As with credit cards there is a loading fee for cash withdrawals (2.75 per cent to 2.99 per cent) plus a withdrawal charge, which is typically between £1.50 and £5.00.

However the charges that catch most people out are those levied for debit card purchases, which are subject to the conversion fee above, plus up to an additional £1.50 per transaction. It's worth taking a couple of minutes to check with your bank what the charges are for your particular plastic before you jet off, rather than getting a nasty shock when you check your account .

At least if you understand the overseas charges, you can adapt your spending pattern accordingly – for example, you don't want to be making cash withdrawals or purchases of £10 or £20 if you're going to be hit with charges of £1.50 plus each time.

While these costs don't sound much in isolation, if you look at a scenario where a family is away on holiday and they make five debit card cash withdrawals of £100 currency equivalent and eight debit card purchases of £50 currency equivalent, they could easily be faced with paying between £40 and £50 extra with some cards.

A final warning: whatever type of plastic you use overseas beware of an increasingly common custom (particularly in Europe) where the overseas retailer or ATM machine gives you the option to pay in pounds sterling, known as Dynamic Currency Conversion (DCC).

Although it may seem a good idea that you know the sterling sum that you'll be debited with, the problem is that it gives the retailer the opportunity to use an uncompetitive exchange rate, which could see you paying over the odds, in some cases by 3 or 4 per cent.

Even though most card issuers charge a 2.75 per cent/2.99 per cent loading fee, opting to pay for your purchases in the local currency is often still a better option than being stung by the poor rate used in a DCC transaction.

Andrew Hagger is an analyst at Moneynet.co.uk

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