Financial companies seek to make money out of us. By and large they are very successful. This means we need to be wary of their attitude as they see individuals as profit opportunities. We need to bear in mind, that to save ourselves money we will have to see through their sales technique, small print and things they would rather we didn’t know. If we retain an attitude of deference and loyalty to the big finance companies, they will just sell you their most profitable products, making sure you receive the lowest return on your financial situation.
These are some tips to get a better deal from the financial system.
Using A Credit Card / Interest Free Overdraft as a Loan.
It is possible to use a credit card as a means to borrow money at very low rates. It requires some care; but, if you build up a balance and then transfer it to other cards, it is usually possible to enjoy interest free credit for upto 12 months. Typically, banks may charge a balance transfer fee. If you switch credit for 12 months, it is an effective interest rate of 2%. Much better than loans or the usual interest rate on credit cards. However.
- Make sure you stick to the agreement and never miss a payment; they will use this as an excuse to cancel the 0% agreement.
- Don’t get overconfident and borrow thousands of pounds assuming you can switch it all to 0%, if you become too indebted banks may stop giving out 0% interest credit cards.
Always Protect Credit Rating.
If you have a good credit rating, these tips become much easier to do. If you develop a bad credit rating, you will find it more difficult and expensive to take out financial products. This is especially true in the current climate. Protecting your credit rating is so important it should be taught in schools. But alas, it isn’t. However, you can teach yourself – most of it boils down to common sense. See Tips for improving credit rating
Banks know the importance of Public Relations. They don’t like unhappy customers. If you have receive a late payment penalty, or charged for going £1 overdrawn, don’t just feel miserable and inwardly curse the bank. Write a polite letter explaining why the penalty was unfair / not deserved / an accident due to lost post e.t.c. You may be surprised that banks often respond to complaints in a favourable way. If they don’t respond suggest the local newspaper may be interested in the story of an 70 year old lady charged £60 for going £0.05 overdrawn. Remember there are many things that you can complain about, such as failure to explain alternatives or failure to explain all terms and conditions. For example, many British customers gained a refund from taking out personal loan insurance. Banks were found guilty of misselling, many millions of pounds still remains unclaimed.
Don’t Stay With Existing Products For Ever.
This is the biggest single mistake people make. Financial companies view these loyal consumers as the ‘cash cows’ – basically they are easy pickings. Even if they get charged high interest rates, the banks know they will not lose these customers because the customers are either too lazy to switch accounts or have a mistaken feeling of loyalty to the company. It is the same for insurance, savings accounts and mortgages. Sometimes it is just a matter of asking the bank for a better deal or renegotiating your insurance deal. Some customers are amazed that if they ask for a new quote, it maybe their existing company who offer
the cheapest deal.
- Every year take the time to renew your big bills and outgoings; true it takes time but the hourly savings make it very worthwhile.
Buying on Credit Cards but always Paying off Balance
Some people may have an aversion to credit cards because they feel it could lead to overconsumption. However, there is no reason why you need to have this attitude. Credit cards can work for you, as long as you learn how to use them properly. If you purchase on a credit card you get an extra 6 weeks before you have to pay the credit card companies this will help your short term cash flow. If you purchase on a credit card, the company will also give you cash back. As long as you pay your balance off in full, a credit card will cost you nothing and gain benefits of more time to pay.
- Don’t Be afraid of plastic, the solution is not to ignore credit cards, but learn how to use them effectively. Never borrow at credit card rates; and always be conscious that spending on plastic will reduce your bank account just like spending in cash.
Be Wary of the Products on Offer
Banks pay commissions to their workers to sell certain products. The products they try to promote will be those which offer a good profit deal for the bank. Examples include insurance schemes for loans; often very hard to complain and offers a great rate of return. Alternatively it may be a bank / building society who tries to push a savings scheme. The savings scheme may be good, but, if you have any debts, it is these that should be paid off first. The bank may fail to advise you the importance of paying off expensive debts first.
If you take out a landline or mobile phone contract don’t forget it may be significantly cheaper to phone via an intermediary company. All you need to do is type in their pin number and then you can benefit from much cheaper tariffs and gain the other benefits of your phone deal.
Avoiding The Consumerist Society
There is a great, if subtle pressure to get caught up in our consumerist society and buy more than we need. It might be the same with financial products; some things we just don’t need. If we avoid overspending, we will not accumulate debts. If we maintain a certain simplicity we can avoid needing expensive loans and debt relief programs. Often the solution is in the prevention rather than the cure. Avoiding overspending
Summary of Ways to Beat the Financial System
- Only buy want you need, not what you desire and certainly not what someone pushes you towards.
- Being cynical pays. If it looks very good it may not be all it seems.
- Shop around – it can be time well spent.
- If in doubt do not commit immediately but go away and think about the pros and cons.