Savings pitfalls to avoid

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Getting a good return on your savings is no mean feat in the current low interest rate climate. We look at some common myths many of us follow that could be having an adverse effect on our savings.

Avoid only repaying the minimum on your credit card

As long as you're only repaying the minimum repayment on your card, the longer you're drawing out actually paying off your total balance. The longer you draw out your repayment term, the more interest you'll end up spending in total. Paying as much as you reasonable can will reduce the amount of interest you'll pay, and the length of time it will take you to repay your balance.

If you can afford to - be sensible with your credit card spending and clear the balance in full each month.

You might feel virtuous popping £25 a month into your savings account, but if the interest you’re paying on the credit card balance comes to the same amount, or more, you’re not really saving anything at all.

Avoid spending on ‘bargains’ on a credit card that’s racking up interest

Try not to put any sale items or discount purchases on your credit card. The saving you think you're making will be outweighed by the interest. This means that 'saving' you made on a 'bargain' purchase will be worthless if you end up paying more than you saved.

Avoid missing a regular payment into a savings account and losing that month’s interest

Some savings accounts require you to make a payment into your savings account every month in order to earn an interest reward. Avoid missing out on earning interest on your savings by setting up a standing order.

Failing to get the best rate

Keeping an eye on the savings rates on offer is essential; especially in a low interest rate environment. You can’t just leave your money and ignore it. Make sure you’re still getting a competitive rate and if you’re not, then switch.

Failing to take advantage of free money

When you’re diligently saving, it makes sense to give your money any boost you can. So take advantage of free money when you see it. It could be a one–off payment for new customers or a government bonus, such as the 25% boost that will be paid to Lifetime ISA holders. That’s a no-brainer for anyone who is thinking of buying their first property any time soon. There are also plenty of tax credits that you could be eligibile, such as marriage allowance, or child benefits.

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