It's the time of year for New Year's resolutions. But while everyone else makes half-hearted promises to drink less, stop smoking or make use of their gym membership, why not make some real financial resolutions? Go for just a few small changes and you could easily make quite a big change to your financial situation.
1. Switch current accounts
The idea that the UK's free banking system might soon be coming to end tends to be met with outrage. Most of us think that the banks should be so grateful to us for the free use of our money that they should not charge us for managing it. But the truth is that free banking rarely exists anyway. You already pay for for slipping into the red, withdrawing your cash from the wrong cash machine, using your cashcard abroad and so on. The point? You are already paying for the service you get so you might as well make sure you are getting the best service you can from your account.
If you usually have a balance of more than £100 in your current account, switch to Santander's Preferred In-credit account. This pays 5% interest on all balances over £2,500 and gives you £100 cashback when you switch. If your balance tends to fluctuate a great deal thanks to direct debits, bills and general use, then consider the Halifax Reward account instead. It pays you £5 a month regardless of your balance, as long as you pay in £1,000 a month.
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However, if you go into the red regularly, focus on minimising that cost rather than on interest rates for those in credit.
The Santander Preferred Overdraft account offers you 0% interest on overdrafts for the first 12 months.
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2. Get a credit card that suits you
Despite the wealth of 0% interest deals available, many people are paying around 20% interest on their credit card debts. It only takes five minutes to check comparison websites such as MoneySupermarket or MoneyFacts to find the best credit card deal. Right now, Barclaycard is top of the tables with a 0% deal for 17 months on balance transfers. Its Platinum card comes with a 2.9% balance transfer fee, but if you apply to transfer over £3,000 before 31 January, they will knock £20 off your fee.
If you don't have credit card debt but might build some in the January sales, go for a card with a 0% interest deal on new purchases. The pick of the bunch is Tesco's Clubcard credit card which offers 0% interest on purchases for the first 13 months.
And those of you who clear your credit card every month should get a card that rewards your good behaviour. The American Express Platinum cashback cardoffers up to 5% cashback in the first three months and then up to 1.25% after that. Just make sure you do clear your debt every month, as the interest rate is a hefty 19.9%APR.
3. Start saving
Finally, make 2011 the year you start saving for your future. If you have got debts, focus on paying them off before you start saving as the interest you are paying on your debt will be more than you can earn on any savings. Once that is done, start putting away a little each month.
Open an individual savings account (Isa) so that any interest you earn won't be taxed you can save up to £5,100 a year in a cash Isa. You will find that the best rates come from accounts that require you to lock your money up for four or five years. They are tempting but, given that interest rates can really only rise from here, you might be best off hanging on to your flexibility and going for a one-year deal instead. The best one-year Isa available at the moment is Northern Rock's Fixed Rate Isa Issue 150, which pays 3.05%.
However, before you rush for that, note that if you wait until the end of March there should be better deals available. This is because at the change in tax year the banks launch special deals to lure in those who have left it until the last minute to invest their annual allowance. That often makes it worth waiting.
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Ruth Jackson-Kirby is a freelance personal finance journalist with 17 years’ experience, writing about everything from savings and credit cards to pensions, property and pet insurance.
Ruth started her career at MoneyWeek after graduating with an MA from the University of St Andrews, and she continues to contribute regular articles to our personal finance section. After leaving MoneyWeek she went on to become deputy editor of Moneywise before becoming a freelance journalist.
Ruth writes regularly for national publications including The Sunday Times, The Times, The Mail on Sunday and Good Housekeeping among many other titles both online and offline.
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