How to make money by spending more
The recession may have started with the mortgage meltdown but it's the nation's savers that have really borne the brunt.
Savings rates have been slashed in the last year or so, meaning that those who carefully put aside their hard-earned cash are suffering now. In fact, a
combination of low interest rates and current high inflation means that many savers are actually seeing their wealth eroded.
The government's official measure of inflation - the Consumer Price Index - is currently 3.4 per cent,so a basic rate taxpayer would need to earn at
least 4.25 per cent to stop their wealth being eroded and a higher rate taxpayer a whopping 5.7 per cent.Those earning over Â£150,000 a year now
pay the new 50 per cent tax rate, and need to earn a massive 6.8 per cent on their savings just to beat inflation.
And with Base Rate still at its record low of 0.5 per cent, and savings rates extremely poor, earning this is extremely difficult from savings accounts.
The average instant-access account pays less than 1 per cent, and even the best buys pay less than 3 per cent, so savers need to look further afield
to make their money work harder for them.
The obvious route is to tie up your savings in a fixed rate bond which pay higher rates of interest than instant-access accounts. If you can tie up your
money for two years you can achieve 4.15 per cent with the West Bromwich Building Society's E Bond 39.* And if you can keep your hands off your
cash for five years, you can earn 5 per cent with the State Bank of India's Hi Return Fixed Deposit account.*
But in the fight to beat inflation, some savers are finding less traditional ways to make money, including spending on their credit card to boost their
savings income. Making money by spending on your plastic might sound like music to the ears of the most ardent shopaholics, but how does it work?
Spend to save
Cashback credit cards reward you for spending by crediting your account with cash each time you use your card. You usually get paid a proporti