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FOOL'S EYE VIEW
Each year, we Brits are swindled out of billions of pounds, but I'm not talking about the various scams, frauds and 'get rich quick' schemes which lure in hapless victims. Nope, I'm thinking of the fortune we lose by buying inferior financial and other products. Below, I list several perfectly legal, everyday products that suck money from our pockets faster than an industrial vacuum cleaner! Bad banking, borrowing and savings products 1. Shabby savings accounts Currently, a great no-notice savings account will pay you an annual interest rate of 5%+ - I found almost twenty of these Best Buy accounts in a quick Internet search. Nevertheless, tens of millions of savers stash their cash away in awful accounts, thousands of which pay anything from 0.1% to 3% a year. Given that we Brits collectively have £528 billion on deposit, switching to Best Buys could see our income boosted by, say, £10 billion a year or more! Why get taken for a ride? Check out the ace accounts in our Savings centre. 2. Bog-standard mortgages The UK's 11½ million mortgage borrowers owe a hefty £918 billion to mortgage lenders; roughly £80,000 apiece. Alas, millions of these borrowers are content to sit back and pay their mortgage lender's standard variable rate, which is the rate paid by all borrowers who aren't enjoying a special-rate deal. Given that Best Buy mortgages weigh in at about two percentage points a year below the typical SVR, some of these borrowers are paying thousands of pounds a year in unnecessary interest. As ever, the best thing to do is to switch and save! Don't be mugged by your mortgage lender: check out the delightful deals in our Mortgage centre! 3. Almost all personal loans At present, a Best Buy personal loan will charge a typical APR (Annual Percentage Rate) of 6% or less. For example, Fool Partner Northern Rock charges a total of £5,436 for an unsecured personal loan of £5,000 over three years without payment protection insurance. However, the majority of borrowers don't bother shopping around for a loan. Instead, they pop into their local bank branch and get skinned alive. For instance, exactly the same loan from your local Barclays branch will cost £6,226 - almost £800 more. Ouch! Find a lovelier loan in our Loans centre! 4. The majority of credit cards When it comes to credit-card cons, I hardly know where to begin. How about annual interest rates of 15% to 25%, when the Bank of England's base rate is a mere 4.5%? Or payment protection insurance that is up to ten times as expensive as it needs to be? Or steep fines, typically £25 or so, for exceeding your credit limit or missing a monthly payment? If you don't pay off your credit-card bill in full every month, you'd be better off with a gorgeous 0% credit card. Learn how to be a craftier cardholder in Ten Tips For Cunning Card Players! You'll find a whole deck of charming cards in our Credit Card centre! 5. Old-fashioned bank accounts Which of these two bank accounts would you prefer? The first is a traditional bank account, which pays 0.1% interest a year on credit balances; charges around 18% a year for approved overdrafts; and wallops you at up to 35% a year (plus massive charges) for unauthorised borrowing. The second is a modern bank account, which pays up to 5% on credit balances and charges under 10% a year for approved borrowing. Sadly, about four out of five adults with a current account have one of the outdated accounts. You know what I'm going to say next: it's time to bin your bank! Check out the beautiful bank accounts in our Banking centre! Big bills and inferior insurance 6. Phone calls I've been a BT customer since the start of the Nineties. Although I knew that it was crazy to pay, say, 5p a minute to call a UK number during peak time, I didn't care enough to do much about it. After all, despite being able to talk for England, I don't make a lot of telephone calls! Then again, my annual BT bill amounts to £126 for line rental (which is scandalously high, in my opinion) plus about the same again for call charges. The good news is that I've been using the remarkably cheap call18866 service, which charges 2p per UK call, regardless of the call length or time of day. Naturally, higher tariffs apply for international calls and numbers beginning with 07, 08 or 09. Thanks to 18866, I reckon that my call charges will fall by around nine-tenths (90%) to a mere pound or two a month. Result! By the way, for calling mobiles, call1899 leads the way, and PC users can make completely free calls with Internet voice software Skype. Hit your household bills for six: drop into our Dealing with Debt centre! 7. Payment protection insurance (PPI) When you take out a mortgage, loan, credit card or other finance agreement, as sure as eggs is eggs, you'll be offered payment protection insurance. This optional cover meets your monthly repayments if you fall ill, have an accident or lose your job, and will pay off your balance if you die (except for mortgage PPI). Sounds pretty useful, huh? Aha, but I worked in this industry for eleven years, yet I've never bought one of these policies. I reckon lenders and insurers collected about £5½ billion in PPI premiums last year, but paid out less than a fifth of this sum in benefits. In other words, it is roughly five times as expensive as a not-for-profit policy would be! If you want to protect your mortgage with this cover, check out Fool Partner helpupay, shop around for a policy online or try your local insurance broker. 8. Insurance from travel agents and tour operators How many of us have blindly bought travel insurance from a travel agent or tour operator, without realising that we're being stuffed? According to independent financial researcher Defaqto, the worst providers to buy your holiday cover from are travel firms, as they routinely charge up to ten times as much as Best Buy providers. For example, for my impending eight-day family holiday in France, my tour operator billed me a whopping £100 for its single-trip policy. I gave it a ticking-off and then explained that my annual European policy cost a mere £15, thanks to a special offer earlier this year for Egg Card customers! Don't be tricked by travel firms: check out the policies in our Insurance centre! 9. High-street protection Guess what? Yup, I don't buy my general insurance policies (such as home and motor cover) from high-street branches, because I like to pay a fair price! I reckon that we waste about £10 billion a year (or £400 per household) by sticking with these firms, whether through loyalty, fear or confusion. What's more, we waste an even larger sum by buying life and health (such as income protection, critical illness, medical and dental) insurance from these high-street highwaymen. On average, I reckon the typical household could save a grand a year by shopping around for Best Buy cover. Start slicing your premiums with a visit to our Insurance centre! Finally, I find myself with a long list of other rip-offs, so I'll revisit this subject soon. Until then, be a smart shopper, and always be wary when you part with your hard-earned loot! Use the Fool to find better credit cards, loans, mortgages, insurance, savings and bank accounts.