Ten ways to recover from the expense of Christmas

The festive season may have cost you a fortune but you can make it all back and more this holiday, says David Prosser

Christmas turns out to be a gift to statisticians, who have spent much of the festive season researching the cost of everything from turkeys to the latest gadgets - plus how people will pay their bills.

Portman Building Society, for example, estimates very precisely that the average household will spend £495.60 over Christmas, comprising £334.88 on presents and £150.75 on entertainment. Other surveys are equally exact, with estimates of the cost of Christmas ranging up to £826.

Whatever you spend, you can make it back by spending a couple of hours over the holiday season online or on the phone. Thanks to the growth of the internet and the advent of 24-hour call centres, you can arrange almost all your personal finances from the comfort of your home.

Here are 10 things you can do during the break - each one should take no more than 15 minutes - to make huge savings during 2006. Most people should be able to save enough to pay for this year's Christmas and next.

CHANGE ENERGY SUPPLIER

People who have not changed gas and electricity supplier since the home energy market was deregulated in the late 1990s can save an average of £140 a year on their fuel bills by switching, according to the analyst Uswitch.

Uswitch (0800 093 0607, www.uswitch.com) is one of several price comparison companies to offer a free switching service. Give it details of your home and your family's energy consumption and it will work out which provider would give you the cheapest deal. You can even move provider on the site, again for no charge.

Uswitch's product strategy manager, Tim Wolfeden, says there has never been a more important time to review your energy bills. Gas and electricity prices are rising much faster than inflation, and many of the steepest increases have been imposed by the older companies that have the most customers.

"We anticipate utility bills rising by up to 15 per cent in the first quarter of 2006 - Powergen has already made a move in this direction by announcing an increase of 12.8 per cent on charges for new gas," Mr Wolfenden says.

"Centrica's recent trading statement highlighted British Gas's intention to raise prices in the new year. The company is blaming a 40 per cent increase in the wholesale gas price within the past three months, but British Gas still remains the most expensive gas supplier."

GET A CHEAP CREDIT CARD DEAL

If you've put Christmas on plastic this year - or have a large balance of any type on your credit card - you can save money by getting the best possible deal from lenders. Although the number of super-cheap deals has fallen in recent months, there are still some excellent ways to cut the cost of credit.

The best option is to transfer your balance to an interest-free introductory offer. HSBC (0800 130130) offers new customers nine months of interest-free credit on its Bank Mastercard, which means you have until September to pay off what you owe without incurring charges.

Don't make the mistake of spending more on the card, however. HSBC charges 13.9 per cent a year on new spending.

Worse, your repayments are first allocated towards the debt you have transferred from elsewhere, so you don't reduce the debt on which you are being charged.

Alternatively, choose a "life of balance" deal, which guarantees a very low rate of interest on the money you owe for as long as it takes to pay off the debt.

American Express (01273 620555) offers a 4.9 per cent life-of-balance deal on its Platinum card, which is open to all borrowers and not just high rollers. Again, avoid new spending on the card.

DUMP YOUR BANK

Despite launching the Switch with Which? campaign two years ago, the consumer group has struggled to persuade people to move current account provider. But doing so this Christmas could save you a fortune.

About 70 per cent of people still bank with the UK's big four high street providers - Barclays, HSBC, Lloyds TSB and NatWest - even though these companies generally pay poor rates of interest when you are in credit and charge over the odds if you go overdrawn.

Alliance & Leicester pays 4.89 per cent interest on credit balances to customers who pay in at least £500 a month - that's almost 50 times as much as most big four accounts. New account holders also qualify for interest-free overdrafts for 12 months after they've switched to Alliance & Leicester.

There is more than just a financial incentive for moving bank.

In Which?'s regular customer satisfaction surveys, the big four score poorly. The consumer group runs a free switching service, which will help identify the best account for you. Log on to www.which.net.

If you are concerned about the hassle factor, don't be. "It's never been easier to switch - the banks now do all the work of moving your direct debits and standing orders for you," a spokesman for Which? says.

"Our latest member research found that 90 per cent of those who had switched since January 2003 found it straightforward."

CHEAPER BREAKDOWN COVER

Martin Lewis, the founder of the Moneysavingexpert internet site ( www.moneysavingexpert.com), says cutting the cost of your breakdown insurance is an easy way to save big sums. "Neither the AA nor the RAC are really the 'fourth emergency service'," Mr Lewis says. "Actually they're subsidiaries of big companies whose aim is to make money."

People like the AA and the RAC because they're well-known names that provide a convenient service. If you break down, they'll send out a patrol that will try to sort out the problem for you - plus drivers pay nothing at the roadside.

Switch to a "pay and claim" service, however, and you can reduce your premiums substantially. Mr Lewis's best buy, Autoaid, operates by despatching a local garage to your car. It charges you for repairs and you then claim the money back from Autoaid.

If you have no cash, Autoaid will ensure it sends out a patrol that takes debit or credit cards. And its response times compare favourably to those of the AA and RAC.

Mr Lewis says a couple looking for recovery and tow, relay cover and home-start from the AA or RAC would normally pay about £150 a year for this insurance. AutoAid provides the same policy for just £29.

REMORTGAGE

"This is the right time of year to consider changing your mortgage," David Hollingworth, of the independent mortgage broker London & Country, says. "All mortgage providers will send you a statement in January explaining what rate you are currently paying and the penalties you would have to pay to get out of the deal."

Anyone paying their lender's standard variable rate - and a surprising number of mortgage borrowers do - will be able to save money by changing lender.

Halifax, Britain's biggest mortgage lender, charges 6.5 per cent a year as a standard rate, while the cheapest comparable deal on the market, a two-year special offer from Lambeth Building Society, costs 4.25 per cent a year. On a £100,000 mortgage, say, that would translate to a monthly saving of £120.

Many borrowers are about to come to the end of a special mortgage offer, having taken advantage of very cheap rates two years ago. If so, it's important you find a new deal - otherwise you'll move on to your lender's standard variable rate and face significantly higher repayments.

London & Country (0845 953 0304, www.lcplc.co.uk) is one of several brokers to offer a free remortgage service. As long as you know what kind of loan you want - fixed, variable or capped - it will find you the cheapest possible deal and arrange the transfer. You pay nothing because it gets referral fees from lenders.

LOW-COST PHONE CALLS

Catching up with friends and family by phone this Christmas? If so, think about the cost of your calls - although the telecoms industry has been deregulated, BT retains the lion's share of the home phone market, even though it is not the cheapest provider for most people.

"At this time of year, the number of phone calls made from residential lines increases dramatically," Karen Darby, the chief executive of the price comparison service SimplySwitch, says. "By ensuring you are on the right deal, it's possible to save up to 70 per cent on the calls that you make."

Until recently, people looking for a cheaper deal have had to continue renting a line from BT, and their calls were then routed through rival providers' networks. Though it was possible to save money this way, it meant paying two separate bills each month.

Now, however, providers such as Carphone Warehouse and OneTel rent lines from BT that they can then lease to customers. This means you can transfer your entire home phone service to a new provider, if doing so will save you money.

SimplySwitch (0800 781 1212, www.simplyswitch.com) provides free cost comparisons so that you can work out whether it would be possible to cut your bills.

CLAIM A TAX REBATE

Nine out of 10 adults pay too much tax, according to the annual TaxAction investigation, conducted by IFA Promotion on behalf of independent financial advisers. It reckons taxpayers will pay £5.7bn too much tax this year - the equivalent of £133 each.

David Elms, IFA Promotion's chief executive, warns: "The onus is increasingly falling on individuals to manage their own tax affairs, but millions have been slow to pick up on this responsibility. "

You don't need a high-paid accountant to make a saving. IFA Promotion says there are all sorts of simple steps you can take to claim a tax refund. If you save, for example, start with cash Isas, which are tax-free bank and building society accounts into which you can invest £3,000 a year.

Similarly, 1 million taxpayers a year miss the annual 31 January deadline for filing their tax return, incurring a £100 fine.

In addition, always make the best of your personal allowances - don't pay too much tax on savings interest, for instance, if you are a lower-rate taxpayer. Inheritance tax, pension planning, employee share ownership, charitable donations and capital gains all offer opportunities to cut your tax bill. IFA Promotion runs an internet site at www.taketaxaction.co.uk, offering tips on how to save.

INSTALL A WATER METER

People living on their own are subsidising large families when it comes to water bills. Though they use substantially less water, they still pay charges based on the rateable value of their homes - so if you live alone in a house identical to one inhabited by a family of five, you'll pay the same bill as them.

The answer may be to fit a water meter, which will enable your water supplier to charge you for the water you actually use. "Generally speaking, large families may be worse off with a meter and single occupiers are most likely to benefit," a spokesman for the Consumer Council for Water, says.

Start by contacting your water supplier, which will give you advice on whether switching to a meter could cut your bills. All the suppliers publish leaflets that include a ready reckoner to help you make the calculation. Some have online calculators installed on their websites.

The good news is that switching to a metered service is a one-way bet. The average unmetered bill in England and Wales is £289, while the average metered bill is £248 - though it varies heavily with region. But if you end up paying more, you can switch back within 12 months, or after your second measured bill, whichever is later.

CUT YOUR INSURANCE PREMIUMS

Too many people automatically take out buildings and home-contents insurance with their mortgage providers, often because they are quietly sold the product when taking out the home loan. In a few cases, your mortgage lender may be offering the best insurance deal, but it's more likely that you'll save money - and possibly get better cover - by arranging cover independently.

"This situation is a legacy from the days when we were obliged to take home insurance from our lender, but that rule has long since been scrapped," Richard Mason, the director of the price comparison service Insuresupermarket.com, says. "A great number of homeowners could almost certainly be getting a better deal."

In a survey conducted this year by the service, borrowers who had bought insurance from each of five top mortgage lenders were able to substantially reduce their premiums by moving to an independent insurer. In some cases, the cost of cover was halved, even for a comparable policy. Use www.insuresupermarket.com to get free quotes on home insurance, as well as on most other types of general insurance, where it may also be possible to make a saving.

CUT-PRICE INTERNET ACCESS

It isn't often that you can get three times the service for half the price, but competition in the broadband internet access market has been fierce over the past 12 months. Anyone who signed up for a deal a year ago should be able to get a much faster service and still make a saving.

"Annual savings of up to £180 can be made by those reviewing and upgrading their deals," Blair Wadman, the broadband product manager at Uswitch, says. "For those signing up for broadband for the first time, costs can vary by about £130 so it is essential for people to shop around." Uswitch, which runs a broadband cost comparison service on its site, recommends avoiding providers that require you to sign up for extended contracts. This will enable you to make further savings as better deals emerge over the next 12 months.

For now, the best services offer a 2Mb connection speed - three times the speed of the standard deal at the beginning of the year. Pipex, for example, offers 2Mb broadband access for £14.99 a month.