Category Archives: Credit Crunch

TopCashback: Cashback discounts on online shopping

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Here’s another credit-crunch busting, money saving tip for all of you online shoppers…

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Creative Commons License photo: elbfoto

I’ve been using TopCashback* for my online shopping lately and I think it’s an absolutely fantastic site. Essentially they give you discounts on shopping that you do online. The discount is paid as cashback straight into your bank account or PayPal.

The cashback discounts include 6% off Dell computers, up to 6% on purchases from Play.com, £40 on a new broadband contract, etc.

How to use TopCashback

Instead of going straight to the retailer website, you’ll need to go to the TopCashback website first. Make sure you’ve got a TopCashback account and then click on the link to the retailer from there. With some luck, your purchase is tracked and your cashback gets paid to your TopCashback account.

How does it work?

Online retailers often pay commission to websites which refer customers to them. This is how many websites make a profit. The most notable websites which make their profits through commission are price comparison websites such as MoneySupermarket. TopCashback is different in that it pays the entire commission right back to you: the customer.

TopCashback makes money through adverts on their website.

See Money Saving Expert for more info.

An example…

I was recently looking to sign up for O2 Broadband. As an O2 customer, I can get 8mbps broadband for £7.34 per month (£88 per year). That’s already a fantastic deal but on top of that TopCashback is offering £40 cashback on O2 Broadband registrations. After cashback, 8mbps broadband costs just £48 for the 12 months – equivalent to just £4 per month. That’s ridiculously cheap.

What are the alternatives?

Probably the most well known “cashback” site is run by loyalty card Nectar. Nectar’s e-Stores gives an absolutely abysmal amount of cashback through (maybe ~1%) .

There are a couple of others such as Quidco and Cashback Kings. Check to see whether you get charged a fee for using the service and if you get 100% cashback.

Get Cashback

* I earn a referral on registrations using this link. Non-affiliate version: http://www.topcashback.co.uk.

Savers are earning more as real interest rates rise

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Creative Commons License photo: G & A Sattler

So lots of my friends have been complaining about interest rates over the last weeks or so. The Bank of England has dropped base interest rates from 5.75% where they were just 6 months ago to 1.0% today. For savers, that also means interest rates have been cut which is bad news for everybody who is saving for a house/college/etc. Right?

Not really. The Times discussed this very recently. It’s no good looking at the nominal interest rate which is advertised by your bank or the Bank of England as it is meaningless. What’s important is the real interest rate. Let me explain.

Let us take a basket of goods which we define to be representative of your expenditure. The basket of goods has a cost of £100 this year.

If we have inflation of 5%, that means the same basket of goods would cost £105 next year.

What if you decide, instead of buying a basket of goods today, you choose to put your money in a savings account earning 5%? Well, the £100 you invest will have turned into £105. When you come to spend your money, all you’ll be able to buy is a basket of goods. You’ll have nothing left over. In real physical terms, you haven’t gained anything from saving as the amount you can consume has stayed the same.

Hopefully this example illustrates that the important thing is real interest rates. Whilst nominal (advertised) interest rates are at the lowest point in yonks, real interest rates aren’t too bad as inflation is very low.

Let’s take a look at nominal interest rates and RPI inflation over the last few years:

Interest rates and RPI inflation

We see that it was pretty bad for savers towards the end of 2008 as inflation totally eroded any interest being earnt. However, with inflation now very close to zero, this is no longer the case. This is more clearly illustrated in a graph of real interest rates:

Real interest rates

As you can see, real interest rates are climbing back up to around 1.5% where they’ve been for the last couple of years.

Conclusions:

  • Whilst it appears that savers are losing out, they’re not doing too badly considering the drop in inflation.
  • Your savings for college are still growing. And if you’re saving for a house, you’re also benefiting from the huge drops in house prices.
  • The low interest rates shouldn’t be encouraging you to borrow. After all, if a house is losing 10% of it’s value each year and you’re paying 1% interest on the mortgage, you’re paying an effective mortgage rate of 11%. That’s a much higher rate than a few years ago when house price inflation would essentially pay off the interest on your mortgage.

Money Saving Expert – Beat the Credit Crunch

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Gold at the end of the rainbowAlmost everybody is feeling a strain on their pockets due to the credit crunch and the global recession. For us Brits, I strongly recommend you pay a visit to Martin Lewis’  MoneySavingExpert.com website. Martin Lewis is fairly well known as a UK consumer champion these days, often appearing on TV shows such as ITV1’s Tonight and Five’s “It Pays To Watch”. The MoneySavingExpert website and weekly newsletter always has some fantastic tips and offers which could easily save you hundreds every year.

A couple of picks:

  • Cheap restaurant deals – It’s amazing just how many restaurant chains are offering 2for1 on meals. We use these deals all the time when we go out for meals with friends or family. After the discount, it often turns out that you pay more for a glass of Coke than for the main meal you had. Some of the deals don’t work between Thursday and Saturday as those tend to be the busiest days for restaurants… check the small print first.
  • Tesco Value Greeting CardSupermarket shopping – The challenge to downsize one brand and see if you can notice the difference. For example, trying items from the “Sainsbury’s Basics” or “Tesco Value” ranges. My personal experience is that on the whole, the value brands don’t tend to be too bad at all. Take tangerines – the Basics tangerines don’t look great on the outside but once you’ve peeled them, you wouldn’t notice a thing. In fact, I prefer the taste of the Basics tangerines to the ‘Taste the Difference’ ones but of course this isn’t a scientific double blind experiment.
  • Cashback sites – If you shop online for technology or electronics items, this one can save you loads. One of my friends claimed that he managed to get a £35/mo. phone contract (with a free phone) for just £5/mo after cashback.
  • Cheaper petrol and diesel – Fuel costs ridiculous amounts in Britain. But you can easily improve the efficiency of your car and make it use less fuel – for example by ensuring the tyres are correctly inflated, turning off the air conditioning or practising eco-safe driving.
  • Cheap train tickets – You can save loads by booking in advance and by splitting your ticket. I recently managed to travel for £15 return on a journey which would have cost £80 full fare. This was achieved by a) booking in advance, b) buying two singles and c) buying a ticket to the station which I would have had to change at anyway and then a separate ticket for the rest of the journey.

I also strongly recommend signing up for the weekly newsletter which is very good. It’s the best way of making sure you know about those time-limited deals.