Making your money work harder

Choosing the right bank or building society, savings account and mortgage product can be a confusing process. There are thousands of different products and providers to choose from, numerous interest rates to make sense of as well as fees, financial jargon and acronyms to decipher.

However, doing your homework and spending a bit of time reviewing all the options and carefully choosing products, will help ensure that you are getting the best deals and service for your hard earned money.

Banking on the Right Account

Don't assume that all current accounts are the same. Increased market competition has seen a rise of high interest current accounts and accounts offering a range of different facilities such as 0% interest overdrafts. Several banks and building societies including the Halifax and Alliance & Leicester now offer current accounts paying 6% plus on balances in credit. Correct at time of print 26.02.08

To help you choose an account that is right for you, consider some of the following factors:

  Location - do you need a branch close to your home or place of work?

  Interest Rates - consider how often and how much your current account will be in credit. If you are in credit on a month-by-month basis, it may be worth looking for a high interest account.

  Fees and Charges - do you regularly use your overdraft? If so, opt for an account with low or no interest overdraft facilities, and make sure you check-out the penalties for exceeding the overdraft limit.

  Electronic Banking - if you carry out most of your transactions over the phone and on the internet, make sure that your bank or building society offers the right services for you.

When choosing an account, test the bank or building society's customer service by visiting the branch and phoning their help/service lines. This will give you a good idea of how helpful, quick and efficient staff are at handling customer enquiries.

A couple of other important useful points to consider include:

  Don't be swayed by free gifts or promotional offers.

  Don't be fooled by 'too good to be true' offers - make sure that you check the small print to find out when high interest and no interest offers expire.

  Don't be lazy - switching current accounts is much quicker and easier than you imagine and could provide you with substantial savings.

  Don't be charged unnecessarily - You may be able to reclaim bank charges by using this template letter on the BBC website:

How do you rate on the credit scale?

Lenders access your credit report when deciding whether to lend you money and which interest rate to offer you. The reports operate on a scoring system dependent on whether you are a home owner, whether you have missed any payments on existing credit and any recent credit applications you have made. Access your report for free by visiting Credit Expert on behalf of Experian.

Getting more from your Mortgage

One of the most effective ways to save money is by choosing the right mortgage product. Few people bother to properly shop around for their mortgages in the first place and even fewer review their deals on a regular basis. Taking the time to understand how your mortgage is structured and keeping track of the market could save you hundreds of pounds every month.

Thousands of mortgage providers can be found on the high street and online, offering a wide variety of different products. There are two main mortgage products available including:

1) Repayment mortgage, where you make set monthly repayments for an agreed time, which cover the loan and the interest on the loan. At the end of the term, the mortgage is cleared.

2) Interest only mortgage, where you make monthly repayments that cover the interest of your loan, but not the capital. The borrower has to pay the loan at the end of the agreement.

How the interested is calculated on each of these products widely varies and includes:

  Variable Rates - the mortgage rate changes in line with The Bank of England interest rates. Your repayment could go up or down on a monthly basis.

  Fixed Rates - the interest rate and repayment amount remains the same for an agreed time period (around two to five years).

  Capped Rates - these rates are fixed, however, if The Bank of England interest rates fall, so do your monthly repayments.

This does not happen with a fixed rate mortgage.

  Cash Back Deals - the mortgage provider offers you a cash sum when you take-out the mortgage.

  Discounted Rates - this mortgage offers a discount off the lender's variable rate. Repayments will fluctuate in line with changes in the variable rate.

More information on the different types of mortgages available can be found on the Government's public service website, Direct Gov

Use the internet to research the different mortgage products on offer. Websites such as www.moneysupermarket.com and www.mortgages.co.uk are good for comparing hundreds of different products and finding the deal right for you. However, it is also worth typing terms such as 'low cost mortgage' and 'no fee mortgage' into Google, as this will bring up products being offered by smaller lenders.

When shopping for your mortgage or re-mortgage, ask yourself and the proposed lender the following questions. These will give you idea of what you are being offered and whether it suits your needs.

   How much can I afford to borrow?

   How much will I be repaying each month and for how long?

   Will my payments go up and when?

   Are there any redemption penalties or other charges?

   Does this mortgage come with insurance?

   What about the small print?

Making the most of your Savings

Always pay off debts prior to saving money, as the interest charged on debt is likely to be greater than the interest gained in a savings account.

However, if you are able to save some money each month, consider how quickly you will need to access your money and how much you will be able to save. These two factors will determine what sort of savings account is right for you. If you save little and often, and need quick and easy access to your money, a high interest savings account may suit your needs. If you save large amounts and can wait days or weeks to access your money, an Individual Savings Account (ISA) will provide you with a greater return on your savings.

Once you have saved a significant amount you may prefer to transfer some of these funds into an investment, which may see your funds grow at a quicker rate. Investments can also have an adverse effect. Always seek advice from an independent financial advisor before investing your hard-earned cash.

And Finally...

When choosing you current account, mortgage or savings account, focus on what you need, the interest offered, ask the financial provider lots of questions and don't forget to always read the small print.