FOOL'S EYE VIEW
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Here's a (pretty unfunny) joke: Q. "What's the difference between customers and sheep?" A. "I know this one - they're one and the same, aren't they?" If they were being entirely honest, this is the punchline you'd expect to receive from most financial services companies, especially those on the high street! It's no joke: if you behave like a silly sheep in the High Street, you're going to get skinned. But this isn't entirely the banks' fault - it's just the way some of us are. For example, rational ignorance prevents many of us from shopping around for financial products, simply because the huge choice of products and their inherent complexity are just too bewildering. The banks make a lot of money from our inertia (a posh word for being slothful and failing to shop around). So, how do we stop being treated like daft sheep and learn to act like smart wolves, which are renowned for their intelligence, stamina and adaptability? If you want to grow long, dark fur and sharp teeth, read these tips on beating the banks at their own game: 1. What a big mortgage interest rate you have, Grandma! The general rule is: the bigger the bank, the higher its standard mortgage rate. This isn't an exact formula but it works pretty well, with HSBC (LSE: HSBA)(NYSE: HBC) and Nationwide BS being honourable exceptions. You're miles better off using the online subsidiaries of high street lenders, whose rates are usually far more competitive than those of their parents. Learn more about shopping around for home loans and re-mortgages here. 2. Buy the mortgage, not the add-ons Banks are notorious for over-pricing mortgage insurance products, particularly home insurance, life insurance, payment protection insurance and the evil endowments. When you're in a mortgage interview, remember that you're a captive sheep. Don't buy anything other than your home loan at this dangerous time.
Don't go into your bank branch for a personal loan - they'll just try to pull the wool over your eyes (groan)! Instead, shop around for huge savings: there are hundreds of telephone, internet and other lenders desperate to lend to you. 4. Learn a few card tricks Credit-card debt can be hugely expensive: most card issuers charge between 12% and 30% APR for the privilege of lending you money. Borrowing at standard card rates is a real howler (groan)! However, with about forty zero-interest offers around, there's no need to bleat about it. 5. Don't bank on your bank Don't be woolly minded by sticking with the bog-standard bank account you've had since you started work or college. You can earn over thirty times more interest while in credit with the latest generation of bank accounts, as well as paying less than half as much in interest when you're overdrawn. 6. Don't go a-broking on the high street If you have invested in shares, give yourself a pat on the fur. Most people haven't and therefore miss out on what is arguably the best long-term investment around. However, don't buy and sell your shares using high street providers; as usual, their charges are far too high. Try one of the many online brokers, where shares can be bought for as little as £1.50 a deal. 7. Avoid (mis)managed funds For many investors, buying managed funds is a baaa-d idea. This is because, over the long term, three out of four fund managers fail to make you more money than a cheap, simple and flexible index tracker. In any case, many managed funds are just closet trackers, so you're paying high management charges for nothing (other than buying the fund manager's new Ferrari). 8. Find a nicer ISA You can shelter various investments - including cash, bonds and shares - from tax using a tax-free ISA wrapper. But don't go with the flock and buy them down your local lane - be a high-tech wolf and buy digitally. The savings make online investing more than worthwhile, especially when you're playing a long game. 9. Get cheap protection for you and your cubs How sheepish would you feel if you fell ill, had an accident, lost your job or even died and left your precious wolf cubs in the lurch? It's important for families to have protection, but this costs a pretty penny on the high street. Shopping around for cheaper life, health and travel insurance can save you thousands in the long run. 10. Loyalty is for dogs - open a smarter savings account Again, the bright lights of the high street lure unsuspecting sheep into unattractive deposit accounts. Why on earth would anyone but a foolish - note the small 'f' - little lamb save in Lloyds TSB's (LSE: LLOY) Flexible Savings account to earn a pitiful 0.2% interest a year, when they could be a wily wolf earning 4.3% AER in a Best Buy instant access account with ING Direct? Finally, bear in mind that a howling wolf pack can be heard from six miles away. So, if you're not happy about any company's service or products, get howling or get Foolish! Find a new Bank Account | Credit Card | Insurance | ISA | Mortgage | Personal Loan | Savings Account | Stockbroker
