If your money isn't working as hard as it can, whip it into shape by following these tips.
If you've over-spent this Christmas already, no doubt you'll be lamenting the empty state of your current account. So why not get organised in time for the New Year, instead? Move those savings to a superior ISA or an outstanding savings account, and while you're at it, why not switch to a better current account, too? At least you'll know the money you do have is working as hard as it can. Come on, set aside a couple of hours (it's unlikely to take even that long) and whip those finances into shape!
ISAs
There are only three months to use up your 2006/7 ISA allowance, or it's lost forever. All taxpayers should be making full use of the £3,000 cash ISA allocation each year, if you can, as cash saved in these tax free vehicles keeps 100% of the interest earned, as opposed to the Government swiping 20% straight away (with higher rate taxpayers losing another 20% via their tax returns). Even non-taxpayers should consider using their allowance -- after all, you may end up paying tax in the future. What's more, the rates are usually amongst the highest to be found!
And remember, we are each entitled to an ISA allowance each year, so you and your partner can stash away £6k between you. Recent news from the Pre-Budget Report also promised that ISAs are to remain, indefinitely.
Save £3k in an ordinary savings account paying 5% for a year, and a higher rate taxpayer would earn £90 in interest. Move that cash to an ISA paying the same rate and you'd make £150 - £60 more! Doesn't that make spending five minutes applying online worthwhile?
Top paying cash ISAs of the moment include the National Savings and Investments (NS&I) Instant Access Direct ISA, paying 5.55% AER (min. deposit £1,000), and Yorkshire BS 30 Day Notice ISA paying 5.5% AER (min. deposit £10). Note that the NS&I ISA does not allow you to transfer in existing ISAs from other providers.
Savings Accounts
If you've filled your ISA, or need somewhere to stash that cash, you need a top paying savings account. And before you ignore this, thinking that your account was a market leader when you opened it, spend a couple of minutes finding out the interest rate your money is currently earning. A number of previous Best Buy accounts have fallen by the wayside, by failing to increase their interest rates.
For example, Ing Direct launched in the UK a few years back with table topping rates that made them an instant favourite. However, failure to keep up with the competition has left them trailing, and they now offer a paltry 4.75% AER, 0.25% below the base rate and a whopping 0.7% behind the market leaders.
Just because your account used to be great, doesn't mean it still is -- so make your cash work harder by moving it to a top paying account.
Best Buy accounts of the moment include the ICICI HiSAVE account, paying 5.45% AER on deposits of £1+, and the Icesave account, paying the same rate for deposits of £250+. Both accounts are instant access, and can be opened online.
Current Accounts
And finally, we'll take a look at current accounts. However, things are not so cut and dried, here as people use their current accounts in different ways.
To keep things simple we'll concentrate on three different types of current account users. The first type choose to use their current account as their main money portal, if you like, leaving their salary in there until it runs out each month, and thus maintaining a healthy balance at all times.
The second type prefer to keep the bare minimum in their current account, transferring any extra to their savings account/ISA each month, as soon as their salary hits it. And the third group prefer to leave their money in their current account until the end of the month, when they sweep out what's left into a savings account just before the next salary payment goes in.
Deciding which type describes you best is the key to choosing the right current account for your needs. For example, if the first type describes you to a tee, a high interest current account is for you. Pick an account like the Alliance & Leicester (A&L) Premier Direct; it pays a market leading 6.1% AER (fixed until 31 Dec 2007). However, make sure your balance doesn't go over £2,501, as any cash above this sum earns a paltry 0.1% AER.
If you're more like the second type (which describes me!), interest rates aren't that important as you only have the bare minimum in there (your savings account rate is the more important factor). You can therefore afford to look past rates to other things. For example, Smile and First Direct both have a reputation for offering excellent customer service -- and First Direct is currently offering £50 to anyone that switches to them. Be warned though - fail to pay in at least £1,500 a month (or maintain a balance of £1,500) and First Direct will charge you £10/month! Luckily there are ways to avoid this.
If you travel frequently (and aren't on expenses) you can save a packet in foreign currency commission charges by switching to the Nationwide BS FlexAccount, with the added bonus that is pays a healthy 4.25% AER (but make sure your balance stays below £3k as any money above this sum will earn 0.1% AER).
Finally, if you're most similar to the third type of current account user, you should look for an account that pays a pretty decent rate, as your money does remain in it for a fair while, each month, whilst also choosing a market leading savings account. Again, the A&L, Nationwide BS or the Halifax High Interest current account (paying 5% AER) could suit you well (but again, keep that balance below £2.5k or risk earning just 0.1% AER).
Choosing your account therefore comes down your particular needs. A final word of warning - all of the current accounts mentioned require £1,000 or more to be paid in each month to earn the interest rates quoted (except the A&L account, which specifies £500/month).
And if you've fallen foul in the past of being charged unfair bank charges, don't just accept it -- claim that money back by following our advice.
So why not move that cash to some superior accounts, and make each pound work as hard as it can? It would certainly make a great start to 2007.