Tips to help survive the economic downturn
6 November 2008
The lending practices in the USA that resulted in the sub prime fiasco and subsequent problems with the international credit markets have contributed to the current global economic downturn. This is having an impact on Australia. With the US and Europe sliding into recession, luckily we are more aligned with China and although we may not go into recession we are certainly facing tougher times. Some forecasters are saying unemployment will hit 6% by this time next year.
In view of these disturbing trends now is the right time to appraise your financial situation and consider what you can do to survive this problem.
Banks.com.au has put together some tips to help you survive an economic downturn.
Home Loans
Compare your home loan interest rate
With the banks not passing on the full rate cuts consider turning up the heat on the banks by comparing your interest rate with what is available in the market. Be warned though, switching your mortgage will most likely involve exit fee penalties for early repayment and you should consider these issues before taking any action. Work out whether any interest savings will be beneficial compared to the cost of switching prior to taking any action.
Consider a no frills basic loan home loan
Most home loan providers have a standard loan and a no frills basic type of home loan. Compare the extra features to see if they are worth the extra 0.5% or more. If you don't need to redraw every week or can attach an interest offset account you can save money by only paying for what you need.
Consolidate Personal Loans
Consolidate multiple credit cards or personal loans that have high interest rates into a debt consolidation loan with a lower interest rate.
If you have a car loan or personal loans that have a high rate of interest, consider transferring to a low rate personal loan.
Citibank have a debt consolidation or balance transfer product which will charge you a very competitive rate of just 7.9% pa for the life of the consolidated personal loan.
Learn more about the Citibank debt consolidation loan here.
Credit Cards
Always try to pay off the outstanding balance of your credit card before it is due.
Consider getting your wages paid directly into your credit card account if you have trouble remembering when repayments or bills are due. Alternatively, set a regular date to transfer funds into your credit card account.
Review the interest rate on your credit card
If you are paying more than 15% pa on your credit card purchases, you may be better off transferring to a low interest rate credit card. A low rate credit card typically has an interest rate between 11.99%p.a and 13.99%p.a. With a low rate credit card, you can save money on interest.
Click here to see our top low rate credit cards.
Get a Credit Card Reward Program to suit your spending habits
If you are set in your spending habits or open to changing stores, consider taking advantage of credit card reward programs that suit your spending habits.
If you shop at Woolworths and buy petrol at Woolworths owned Caltex petrol stations, then consider the Woolworths Everyday Money Credit Card. With this credit card, you will be rewarded with in store gift vouchers for buying groceries and petrol.
If you regularly travel by plane, check out airline reward programs.
Bank accounts and Savings Accounts
With the increased difficulty and cost of getting funds via the international credit market, banks are thirsty for your cash at the moment. This has led to quite a few banks offering some very good deals on their savings accounts.
Move funds from no interest transaction bank accounts to high interest savings accounts.
Having access to cash is important for everyday use and most ordinary transaction bank accounts pay little or no interest on these funds.
If you have surplus cash in a transaction bank account that you are using as savings, you could be earning more by moving your money to a high interest savings account. Most banks have high interest accounts that can be attached to your transaction account so you can switch funds between them overnight or instantly.
Some examples of savings account deals include:
- Members Equity Bank Online Savings Account is offering up to $50 for people who sign up for a new account and it is paying 7.50% pa.
- Suncorp is for a short time offering a bonus 1.65% on top of their 6.5% interest rate on their eOptions account.
- BankWest TeleNet Saver is offering a competitive 7.1% pa also for a limited time.
Click here to compare savings accounts.
