FOOL'S EYE VIEW
Five Great Ways To Waste Money!

By Alison Hunt (TMFAlly)
July 19, 2005

According to a study by Churchill Insurance, women spend (or some would say, waste) a fortune on shoes, with many undaunted by a £300+ price tag on a pair of Jimmy Choos or Manolo Blahniks. Carrie Bradshaw has a lot to answer for! In fact, Churchill estimate that if you spent an average of £40 on shoes each month from the age of 14, you'd spend over £31,000 by the time you hit 80. Blimey!

Although spending so much on shoes may seem like a waste of money, many of us are guilty of wasting plenty more simply by not being on top of our finances. We could literally be 'giving away' thousands of pounds each year, which could be avoided simply by keeping track of our outgoings. So if you're guilty of any of the following money wasting techniques, do something about it, today!

1. Bank accounts with monthly fees

If you currently pay a monthly fee for a packaged bank account, you could be wasting a lot of money. Packaged accounts, such as the NatWest Advantage Gold account, offer perks such as annual family travel insurance, a one per cent discount off a NatWest personal loans and extended warranty for goods, for which they charge a monthly fee of £10.

However, many of these perks can be obtained elsewhere for free. Alliance & Leicester's Premier Plus current account, for example, includes a family travel policy and charges no monthly fee. The Nationwide BS credit card offers a free extended warranty on purchases over £50. And although a one percent discount on the NatWest personal loan rate of 7.9% APR is good, the current Best buy personal loan from Moneyback Bank is just 5.7% - an effective discount of more than two per cent.

Independent consumer magazine Which? goes one step further, believing that these monthly fees could be a disguise to allow providers to bring back banking fees. Why not save yourself that £120 a year; if you spend a bit of time shopping around you can gain the same perks, for free.

And if you really must have a packaged account, you may be interested to know that Barclays is currently offering its Additions account (£7.50 per month) with a number of other perks free for 10 months.

You can switch to a better bank account, including Alliance & Leicester, Smile, Nationwide BS and Cahoot in our Online Banking Centre or apply for the Moneyback Bank loan in our Personal Loan Centre.

2. Earning little or no interest on your money

NatWest's Advantage Gold account also pays just 0.25% AER interest (many other packaged accounts pay a shocking 0.1% AER). Cahoot, on the other hand, pays 4.35% AER. And Alliance & Leicester pays a whopping 5% AER. If you prefer to keep some money in your current account, make sure it's earning all that it can by moving to a better account. Many providers will give you a cash bonus to switch, too.

And as for your savings, did you realise that the market leading accounts pay 5% or more? Unfortunately, many accounts have recently cut their rates: Alliance & Leicester's Online Saver (Issue I) has dropped from 5.1% AER to 5% AER and even ING is proposing a forthcoming cut to 4.75% AER, in August. You can, however, still currently earn 5.2% with First Direct, or 5.1% with Cahoot, both of which are instant access accounts. So don't let your savings wither, move to a better account and earn some interest on your money.

You can apply for the Alliance & Leicester account, or the First Direct or Cahoot accounts in our Savings Centre.

3. Paying interest on your credit card balance

Are you paying interest on your credit card balance each month? Or worse, is this balance on a store card? Credit card balances can rack up interest at an astonishing rate and most store cards charge over a whopping 25% APR on your borrowings! This is serious money that is simply being wasted. What's more, if you're only making the minimum payment of 2%, a balance of £2,000 could take 40 years to clear (at 19.6% APR). Eek!

So what should you do? Transfer those balances to a 0%, balance transfer credit card. Check which of the many 0% cards available will offer you the best deal and move that balance without delay, and that goes for any expensive loans, too. And aim to pay off that balance before the interest free period expires. If you really can't manage that, clear as much as possible and switch the remaining balance to another 0% card when your current deal is up. Finally, don't forget to cancel your old card (it would probably also be worth cutting up the new card too to prevent any further spending!). And if you're one of the few people still actually paying an annual fee, you really are throwing your money away! Move to a free card, today.

Additionally, watch out for fees charged when using your credit card whilst abroad. You could be charged an additional £27.50 for every £1,000 spent outside the UK, in what's known as loading fees. Most credit card providers charge this fee, in fact, only Nationwide BS and Lombard Direct do not charge their customers a penny to use their cards, worldwide. Discover the best cards to use abroad and how to avoid other unfair fees whilst in foreign climes, here.

You can find a number of 0% balance transfer cards, or apply for the Nationwide BS credit card, in our Credit Card Centre.

4. Paying your lender's standard variable rate

When was the last time you re-mortgaged? Most mortgage deals revert to the lender's Standard Variable Rate (SVR), once any discount period is up, and if you're not quick to move to a better deal you are literally throwing money away. Just a few months worth of paying your lender's SVR could, annoyingly, completely negate the savings made by the discount deal!

Solution: Re-mortgage to a better deal! Switching a 25 year, £100,000 mortgage from an SVR of 6.75% to a flexible deal at 5% would save you £106 each month (your payments would drop from £690 to £584). Plus, as you'll now be paying back a total of £175,377 rather than £207,273, you'll be saving yourself nearly £31,900 over the course of the term!

Choosing a flexible deal makes plenty of sense. As the interest is calculated on a daily basis, every pound counts straight away, plus, you can generally make overpayments of up to 10% of your mortgage each year. If you were to overpay just £50 each month into the above mortgage, you could save a further £12,250 and shave 3.6 years off your term, meaning that you would be mortgage-free in just over 21 years.

Find out why it's a good time to re-mortgage and the top fixed-rate deals.

You can find apply for a mortgage from Halifax, Britannia BS, West Bromwich BS, the One Account and many more providers in our Mortgage Centre.

5. Being over-insured

How much cover do you and your family have? Although the usual complaint is that many people do not have enough insurance to cover themselves and their families should anything happen, being over-insured is surprisingly common and wastes a lot of money that could be used more usefully elsewhere.

A single man with his own property and no dependents does not really need to waste his money on a life insurance policy, for example, no matter how much his mortgage lender may try to persuade him otherwise. An income protection policy may suit his needs far better. However, he should check the policy carefully if he's self employed, as there would be no point being covered against redundancy, for example.

Make sure you have correct and adequate cover. Many companies offer their staff life insurance, critical illness cover and income protection insurance as part of the standard benefits package check the details of yours. If you wish to take out medical cover through work for both yourself and your spouse (and it's a taxable benefit) choosing to do this through the lower tax payer's company will save money. Payment Protection Insurance is vastly overpriced and often best avoided. And finally, remember that most identity theft insurance policies are pointless as money stolen via ID theft will be refunded by your bank anyway. Which? Magazine advises consumers to spend that money on equipment such as a shredder, instead!

Find out how to get the right level of cover in our Insurance centre.

So follow these tips and keep on top of your finances - you'll stop wasting money, too!