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FOOL'S EYE VIEW
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Banks, eh? You can't live with them, and you can't live without them. What's more, you can't use a muck spreader to cover your local branch in manure - actually, you can, but you'd probably end up being jailed and fined, which is what happened to one farmer! Seriously, though, banks often top the list of Britain's most hated companies. Customers are particularly unhappy with junk mail, queues in branches, poor savings rates, call centres, etc. So, without further ado, here's how to get your own back on the banks (and building societies, credit-card issuers, insurance companies, etc.) - and make a fair bit of money in the process! 1. Opt out of junk mail Unsolicited junk mail and intrusive sales calls are plagues on modern society. What's more, most direct mail ends up as landfill, which offends me because I'm a keen environmentalist. That's why I'm registered with the Mailing Preference Service (MPS) and Telephone Preference Service (TPS), which cut out most of this tide of dross. However, registering with the MPS and TPS will not stop offers from companies with which you already have a relationship, such as your bank. If you're fed up with being bombarded with mailings for credit cards, personal loans and so on, you need to tell your bank to add a 'do not mail or call' marker to your account file. This should keep the unwanted bumf to a minimum. 2. Find a better bank account One frequently quoted 'fact' is that married people are likely to get divorced than switch banks. Aha, but simply not true: almost 296,000 people divorced in 2002, whereas over 750,000 people switched banks! Nevertheless, I get the impression that most people in Britain are too scared to switch their bank account, for fear that something will go wrong during the transfer. But there's no need to be afraid: thanks to a new Banking Code, switching has never been easier. If you stick with your old-fashioned current account out of misplaced loyalty, you're probably earning interest on credit balances of 0.1% a year and paying 20% or so on your overdraft. Compare that to the new generation of bank accounts, which pay up to 47 times as much interest and charge less than half as much when you're in the red. Frankly, it's no contest! 3. Move your mortgage Up to half of the UK's 11½ million mortgage borrowers are paying their bank's full standard variable rate - around 6% to 6¼% after the latest round of rate rises. The banks absolutely adore these loyal homeowners, because they contribute billions every year to their profits. If you can move your mortgage without paying a hefty redemption penalty (a fine for early settlement), demand a better deal from your bank. If it tries to fob you off, ask for a redemption statement and threaten to go to another lender. If it still doesn't value your custom, find a lender that wants your business - there are hundreds out there. Finding a cheaper mortgage deal every three years or thereabouts should save a typical borrower around £1,000 a year, which adds up to an absolutely massive saving over twenty-five years or so. 4. Shop around for insurance If you want to make your bank happy, buy its insurance products! The high-street banks and building societies are notorious for selling over-priced life, health, car, home and travel insurance. Buy these on the high street and you're probably paying upwards of £750 a year too much. Although shopping around for insurance cover is deathly dull, it's also amazingly rewarding. Let's say you take five hours a year to price-check your policies against the Best Buys and get a few quotes from various websites, brokers and direct insurers. If you save £750 for your efforts, you're looking at an hourly wage of £150, which most fat cats would be proud to earn! 5. Transfer your debt to 0% cards We Brits are hugely fond of our plastic: there are around 64 million credit cards in issue in the UK, compared to about 41 million in the rest of the EU combined! The problem is that most credit cards offer pretty poor value for money - some of the UK's most widely held cards charge annual interest rates of 18% or more. If you pay off your credit card in full every month, get paid to spend: switch to a cashback card that refunds upwards of 1% of your spending every year. If you don't, switch your balance(s) to one of the sixty or so cards that charge no interest on balance transfers for anything up to nine months.
6. Switch your savings A recent survey revealed that three out of five savers in Britain believe they are not getting the best interest rate on their savings. In fact, the true proportion is far higher than this, with tens of millions of savers losing out on an estimated £5 billion a year from sticking with useless accounts. Very few easy-access savings accounts pay more than the Bank of England's base rate (currently 4.25%), and I found only one that paid 4.5% AER with no strings attached. If you're not earning this much on every pound of your savings, it's time to switch. Even better, open a cash mini-ISA and pay no tax on your interest. Also, if you have any cash in tax-free saving accounts with your bank, such as cash ISAs, TESSAs or TOISAs, check the Best Buy tables today. You could earn 4.5% or more on this money, too. 7. Shift your investments Banks are also notorious for selling inferior investments - for example, take the widespread mis-selling of mortgage endowments. If you've been investing for a long time, you may have a jumble of ISAs, PEPs, unit trusts and OEICs with your bank or elsewhere. In all probability, you'll find that the performance of those investments managed by your bank has been far worse than expected, largely due to high charges and poor investment returns. One answer is to find a specialist discount broker to put all your investments under one roof, which should cut both your charges and your paperwork. Several of these companies refund some or all of their annual commission back to investors via cashback or reduced management fees, which equals higher overall returns and more money in your pocket! 8. Don't buy shares on the high street If you buy and sell shares through a high-street stockbroker, you're paying well over the odds for this service. The commissions charged by these providers are often several times those levied by the most competitive online brokers, plus most high-street operators charge additional inactivity or quarterly management fees. Whether you're an active trader or passive investor, you'd be better off switching. 9. Choose the right personal loan Personally, I'm not a fan of borrowing money for any reason other than to buy a house. I can't see the point of running up a debt to go on holiday or to buy a car that starts falling in value from day one. Then again, if you do need to raise money for a sizeable purchase and you don't have the cash to hand, a personal loan is one option. However, don't trot along to your local bank branch - get online instead. That way, you'll end up with an APR (Annual Percentage Rate) closer to 6% than 16%! 10. Do the same for your business, children and so on Once you've dumped the poor-value products that you've bought from your bank (or it has forced on you), start doing the same for others: get a better bank account for your business, a superior savings account for your children, and so on. You can sit back and relax when your friends, family and colleagues start worshipping you as a financial guru! Where next? Find several market-leading accounts in our Online Banking centre.