My Five Favourite Financial Products
Fed up of bad financial news? So is Laura Starkey! Things might be gloomy right now -- but there are still some great products available to help when times get hard.
With inflation rising, financial institutions looking shaky and the economy drifting into decline, you could be forgiven for thinking there's nothing but bad news for us Fools to report.
Admittedly, there are good reasons why many of us might be feeling concerned right now. However, (always one to buck a trend) I've decided to write something positive today.
Despite the general gloom, there are still some brilliant financial products out there. And in my opinion, it's now more important than ever to bag the best of them.
With tough times ahead, it pays -- literally! -- to have the bank accounts, credit cards and savings products that work for you. So, here's a round-up of my five favourite financial products -- plus the reasons why I think they're worth having.
1. A clever current account
In my opinion, getting a clever current account should be near the top of any Fool's financial priority list.
The majority of current accounts on the market pay derisory rates of interest on in-credit balances -- and those on offer from major high street banks are often especially stingy.
However, Alliance & Leicester's Premier Direct Current Account pays a whopping 8.5% AER on balances up to £2,500. That's 85 times more than the interest rate on offer from some of Britain's big-name banks.
Over the course of a year, this could see your current account benefit from hundreds of pounds in extra interest.
Alternatively, if your account is often overdrawn and you're being charged for the privilege, switching your current account could cut this cost.
Alliance & Leicester's Premier Current Account offers customers an interest-free overdraft of up to £2,500 for a year -- which means you'll have twelve months of breathing space to try and get back into the black. Even better, new customers will receive a £100 sign-up bonus when they switch to this current account from another bank.
(Please note, both these clever current accounts require that you pay in at least £500 a month. However, this is a lower threshold than that set by most competitive current accounts, which tend to demand deposits of £1,000 per month.)
2. A brilliant balance transfer card
Whatever the size of any outstanding credit card balances you have, it makes sense to pay as little interest on them as possible.
Transferring old debts to a 0% balance transfer credit card is a great way to cut the cost of your borrowing -- and speed up the process of paying it off.
There are several great credit cards currently available for this purpose -- but, ultimately, my top pick has to be the Virgin Money Credit Card MasterCard. It offers users an interest-free period of 15 months on balance transfers. That's a good chunk of time that will allow you to demolish (or at least make a dent in) existing debts.
Even better, Virgin Money also allows money transfers as part of this 0% deal. This means you could choose to pay off an interest-bearing overdraft or loan with the card too.
The card also offers customers a three month 0% period on purchases debt.
Usually, I'd advise anyone to steer clear of spending on a balance transfer credit card, regardless of the interest rate on offer, because most credit card companies operate negative payment hierarchy. This forces you to pay off your least expensive debts first.
The Virgin Money Credit Card MasterCard, however, operates a positive payment hierarchy: while the 0% purchases promotion lasts, any repayments you make on the credit card will be used to pay off your new, interest-bearing debts (from your new purchases) before balance transfer (interest-free) debt.
This means that if you buy something using this card, you'll avoid the negative payment hierarchy trap -- but only if you pay off your purchases in full before the three month promotional period ends.
3. A cool cashback credit card
A cashback credit card is, in my opinion, a wonderful thing to have in your wallet.
Simply by using a cashback credit card instead of your usual debit card, you could rake in hundreds of pounds of free cash over a year.
The best cashback card on the market right now is the American Express Platinum Cash Back Card. It offers 5% cashback for three months on spending of up to £4,000. After this, you'll earn 0.5% on the first £3,500 you spend, 1% on £3,501 to £10,000, and 1.5% on spending of £10,001 or more.
Remember the golden rule, though: whatever you spend on a cashback credit card must be paid off in full before it starts accruing interest. Otherwise, the interest you pay will outweigh any of the card's cashback benefits.
4. A super savings account
However much (or little) you can afford to save, stashing your cash in a high-interest savings account is the best way to help your nest egg grow.
My favourite, from Kaupthing Edge, pays a market-leading 6.55% AER. What's more, it doesn't come with complex terms and conditions or temporary bonuses.
Savers don't need to give notice to withdraw their cash from Kaupthing, aren't penalised for taking money out and have online and telephone access to their accounts.
And although the interest rate on the account isn't fixed, it is guaranteed to be at least 0.30% above the Bank of England base rate until 1 February, 2012.
However, the Easy Access Deposit Issue 2 savings account from Anglo Irish is also well-worth a look. It offers savers interest of 6.40% AER on balances up to £2,000,000.
What's more, although you won't get internet access to this account, any withdrawals you wish to make will be credited to your current account by CHAPS -- which means your money will reach your nominated account on the same day.
Perhaps most importantly, thanks to recent changes to the Irish scheme that protects savers' deposits, any UK savers whose money is held with Anglo Irish will enjoy roughly £80,000 worth of deposit protection. That's more than twice the £35,000 protection offered by the UK's own FSCS!
5. The right card for overseas spending
At the moment, there is only one bank that won't charge you for spending on your debit card abroad: Nationwide. That's why its FlexAccount is one of my five favourite financial products.
Other banks will hit you with a host of charges for using your debit card overseas -- but Nationwide won't apply any additional fees for spending on your card in another country.
In my opinion, it's worth opening a Nationwide FlexAccount even if you only intend to use it when you go away.
Its debit card is another Foolish financial product I think it's well worth having on hand.
So, those are the five products I think could provide some help -- and maybe even hope! -- for Britain's beleaguered borrowers, spenders and savers.
But what do my fellow Fools think? Are there personal finance products you think others should know about? If so, why not share your thoughts in the comments space below.