Money you didn't know you had: Surviving Christmas
'Tis the season to be jolly profligate - but that needn't mean a financial hangover. David Prosser has 10 ways to recoup the cost of Christmas
Saturday 23 December 2006
Are you braving the weather for a last-minute Christmas spending spree today? If so, don't expect to have the shops to yourself - Barclays Bank is expecting more than £490m to be withdrawn from the nation's cash machines between 10am and 4pm today alone.
Retailers have endured a nervous run-up to Christmas. Some have performed strongly - John Lewis is boasting record sales, for example - and others less so. But with Christmas Day falling on a Monday, giving shoppers a whole weekend for last-minute buying, a clear picture of what consumers have spent, both online and on the high street, has not yet emerged.
Nevertheless, debt counsellors are braced for a huge rise in the number of people with financial difficulties in the new year. Many borrowers are already in trouble - MoneyExpert, the personal finance analyst, estimates that about four million people have yet to repay last year's debts.
Boosting your income to cope with the cost of Christmas is difficult. For most of us, reducing outgoings is a lot easier. There are all sorts of ways to lower the amount of cash that leaves your bank account each month.
Many of the suggestions here are tasks you can carry out during the holidays next week. Some will take just a few minutes, but may save thousands of pounds in 2007. The more you do, the sooner you'll recoup the cost of Christmas.
CUT DEBT REPAYMENTS
Paying for Christmas using a credit card can be a sensible way of coping with the expense. It enables you to spread the cost of the festival over an extended period. However, you must ensure that you have the cheapest card possible. That way, you'll pay minimal interest charges on top of your seasonal spending.
Many credit-card providers have dropped the generous introductory deals they used to offer, but it is still possible to move your balance to a card where you will pay no interest at all for an extended period (though there may be a transfer fee).
The two best deals of this type are GE's Transformation card and Halifax's One card - both of which offer 0 per cent interest for 12 months on balance transfers from other credit cards. GE will charge you a 2.5 per cent transfer fee, while Halifax will charge 3 per cent.
The alternative is a "life of balance" deal, where you get a low rate guaranteed not to rise for as long as you have the debt you are transferring. This sort of card may suit borrowers who know it will take longer than 12 months to pay what they owe. Marks & Spencer's &More credit card costs 3.9 per cent for life.
SWITCH YOUR ENERGY COMPANY
The prices that large gas and electricity companies pay for fuel have fallen sharply since last spring, but many are still increasing the prices paid by their domestic customers. A new round of price hikes will take effect on 1 January.
However, some providers are cheaper than others and if you have never changed supplier, you could cut bills by up to one-fifth. Even if you have changed in the past, it should still be possible to save money by moving supplier.
The easiest way to find the cheapest deal is to log on to the price comparison site uSwitch (www.uswitch. com, or phone 08000 930 607). It's a free service that asks you to provide details of your home and your family's energy consumption. It will then work out which provider will currently offer you the best prices - and arrange the switch if you so desire.
Ann Robinson, the company's director of consumer policy, says British Gas customers, in particular, should consider moving this Christmas; uSwitch reckons the company will be the most expensive energy provider in 2007, but it remains the country's most popular supplier. "British Gas clearly remains defiant to government and consumer calls for lower prices," Robinson says.
BASH YOUR BANK
Britain's biggest banks are Scrooges when it comes to paying interest if customers are in credit, but they'll pile on the pressure if you go overdrawn. The consumer group Which? urges current-account holders to fight back in two different ways.
The first is dump the biggest banks in favour of smaller providers that offer more competitive deals. Halifax, for example, pays 5 per cent on credit balances - 20 times more than most of its bigger rivals. Other providers that score highly on interest rates for credit balances or overdrafts include Alliance & Leicester, Nationwide Building Society and Smile.
The second part of Which?'s campaign is to persuade bank customers to claim back bank charges. In the new year, the Office of Fair Trading is expected to rule that banks which have been charging unauthorised overdraft fees of £20 or more have been breaking the law. The ruling will also apply to charges for problems such as bounced cheques and failed direct debits.
Even before the ruling, many consumers have been successfully claiming back these charges from their banks. Which? has details of how to do this, including templates for letters to send to your bank, on its website (www.which.co.uk).
The personal finance campaigner Doug Taylor says: "Just going over your overdraft limit by a few pence can result in unfair and excessive bank charges piling on to your bank account, making the situation worse - and there isn't much Christmas spirit from the banks when it comes to overdraft charges."
LOWER MORTGAGE PAYMENTS
Changing your mortgage lender could be particularly rewarding, especially given that the Bank of England is expected to raise the cost of borrowing in the new year.
David Hollingworth of the independent mortgage broker London & Country says: "All mortgage providers will send you a statement in January explaining what rate you are currently paying and the penalties you would have to pay to get out of the deal."
Anyone paying their lender's standard variable rate - "and a surprising number of mortgage borrowers do," Hollingworth says - will be able to save money by changing lender.
Halifax, Britain's biggest mortgage lender, charges 7 per cent a year as a standard rate, while the cheapest comparable deal on the market, a two-year special offer from Alliance & Leicester, costs 4.84 per cent a year. On a £100,000 mortgage, say, that would translate to a monthly saving of about £120.
London & Country (08459 530 304; www.lcplc. co.uk) is one of several brokers to offer a free remortgage service. Its advisers will talk you through the kind of loan you need - although they don't offer advice - and arrange the deal at no additional cost, having found the best buys on the market.
CHEAPER PHONE CHARGES
You don't have to stick with BT for your home phone service - moving to a rival supplier is easier than it has ever been, and this is now one of the best ways to cut household bills.
"The number of phone calls made from residential lines increases at Christmas," says Karen Darby, chief executive of the price comparison service SimplySwitch. "The right deal will enable you to save up to 70 per cent on the calls that you make."
There's no need even to continue renting your phone line from BT. Other providers, such as Carphone Warehouse and OneTel, rent lines from the company that they can then lease to customers. This means that you can transfer your entire home phone service to a new provider, if it turns out that doing so will save you money.
SimplySwitch (08007 811 212; www.simplyswitch. com) provides free cost comparisons so that you can work out whether it will be possible to cut your bills.
And while you're at it, you should also log on to www.onecompare.com. This price comparison service specialises in cutting the cost of mobile-phone charges. Like Simply Switch, it's free - and the site will help you to identify the right tariff and then provide details of the cheapest suppliers.
If you're driving over Christmas, there's a simple way to ensure that you don't pay over the odds for petrol - www.petrolprices.com is a free website that will tell you where fuel is available most cheaply in your area. Simply give the site your postcode, tell it how far you're prepared to travel to fill up, and it will tell you where to go. Carry on using the site in the new year for savings in 2007.
Martin Lewis, the founder of the Money-savingexpert internet site (www.moneysavingexpert. com), says there are other ways to cut petrol costs. "Supermarket petrol stations often come out cheapest," he says. "Some of these also use petrol promotions as a way to draw in more customers." He points drivers to the RAC's website (www.rac.co.uk), which includes a range of tips for more efficient driving.
While you're at it, you can cut the cost of driving in other ways. Insurance (see below) is a big opportunity, but so too is the price of roadside recovery services.
"Neither the AA nor the RAC is really the 'fourth emergency service,'" Lewis adds. "They are subsidiaries of big companies whose aim is to make money."
He recommends instead a "pay and claim" service such as AutoAid. It operates by despatching someone from a local garage to your car. You are charged for repairs, and then you claim the money back from AutoAid. Lewis says a couple looking for recovery and tow, relay cover and home-start from the AA or RAC would normally pay about £150 a year for this insurance. AutoAid provides the same cover for just £32, and has similar response times.
WATER FOR LESS
If you live on your own, or even with a partner, chances are that you're paying exactly the same water charges as the large family down the road, even though they'll be using far more water. Installing a water meter, so that you pay for what you are actually using, is the way to put an end to this.
A spokesman for the Consumer Council for Water says: "Domestic customers can request a water meter, which is fitted free of charge unless the location or pipework make it impractical or uneconomic for the company to do so."
Even better, your water supplier has a statutory responsibility to advise you on whether installing a meter will save you money. The water companies publish ready reckoners to help you make the calculations, and many have online calculators on their websites.
Last year, the average unmetered bill in England and Wales was £289, while the average metered bill was £248, although there are wide regional variations. But don't worry about the gamble - if you get it wrong and end up paying more, you can switch back within 12 months.
Many analysts thought that 2005 was a watershed year for broadband internet access, with providers cutting charges and improving services at breakneck pace. As it turned out, however, 2006 brought even better news for customers, with a price war driving down costs even further.
The good news is that it should become much simpler to change broadband provider in 2007, which will help people to save money. Jason Lloyd of the price comparison service MoneySupermarket says: "The introduction of mandatory MAC codes [the data needed to change a phone line] takes effect in February and will make switching between broadband suppliers much easier."
MoneySupermarket and other sites offer broadband price comparisons for free. They also offer useful guides to selecting the type of service you need.
However, think twice about choosing a deal simply on the basis of cost. Many of the "free" deals introduced this year have disappointed their customers. TalkTalk, for example, the most high-profile launch, has performed poorly in customer satisfaction research.
PARE DOWN INSURANCE PREMIUMS
Most people will be able to make savings on all the main types of insurance they buy - particularly on home, car and travel policies.
Richard Mason, a director of Insuresupermarket. com, the price comparison service, says: "A great number of homeowners could almost certainly be getting a better deal."
Too many people still buy home insurance from their mortgage lender. Research by Insuresupermarket.com suggests that borrowers who buy this cover from any of the five top mortgage lenders could reduce premiums substantially by moving to an independent insurer. In some cases, the cover cost was halved, even for a comparable policy.
Use the site (at www. insuresupermarket.com) to get free quotes on home insurance, and on most other types of general insurance, where it may also be possible to make a saving.
In the travel sector, switching to an annual policy may help. On motor insurance, innovations such as Norwich Union's "pay as you drive" policy may help, while online services such as Swift Cover also offer good savings.
CLAIM A TAX REBATE
Finally, getting a tax refund doesn't have to be something that only happens to other people. IFA Promotion, an organisation set up to promote financial advice, claims that nine in 10 people pay too much tax every year. Its TaxAction campaign reckons we are now wasting £7.6bn a year in this way.
You don't need an expensive accountant to make a saving. IFA Promotion says there are all sorts of simple steps you can take to claim a tax refund. If you save, for example, start with cash ISAs, which are tax- free bank and building-society accounts into which you can invest £3,000 a year.
One million taxpayers miss the annual 31 January deadline for filing their tax returns each year, incurring a £100 fine.
In addition, always make the best of your personal allowances - don't pay too much tax on savings interest, for instance, if you are a lower-rate taxpayer. Inheritance tax, pension planning, employee share ownership, charitable donations and capital gains all provide opportunities to cut your tax bill. IFA Promotion's website (www.taketaxaction.co.uk) offers tips.
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