Step 3: Beat Banks At Their Own Game

Banks (and most other financial companies) are often portrayed as big, ugly beasts that have no interest other than ripping people off. Certainly many of them have put short-term profits before almost anything else in the recent years. The financial crisis has changed some things for the better, but you still need to be on your guard.

Understanding a little bit about how the financial services industry works and how it markets its products helps a lot, though. Here are a few things to consider when buying any financial product:

Keep flexible
Many financial products come with strings attached. So you might lose interest if you withdraw money early, or get charged if you pay off a loan early. So it’s worth giving some thought as to how you might use a product in future, and choose one that gives you the flexibility to do what you want.

Low-cost (usually) wins
Banks won’t like to admit it, but there is often very little difference between many of the financial products they and their competitors offer. Some will have more bells and whistles, but the sticker price is often main thing that varies. So it’s worth looking around for a better deal, as the savings can be substantial.

New customers only
Banks often reserve their best deals for new customers, so the attractive deal that got you hooked in the first place may become a lot less competitive over time. If you have had the same insurer or savings account for  a number of years, check to see how it stacks up now.

Soothing words, free pens and celebrity endorsements
Certain words are used and abused over and over again in financial marketing. ‘Guaranteed’ and ‘Bond’ are two of the main victims. And just ignore anything that comes with a free gift or is given a glowing recommendation by a celebrity.

Complexify!
Financial companies like to baffle us with big words, even when something can be explained in much simpler terms. If you don’t understand how a financial product works, don’t touch it. Never be afraid to ask if you’re unsure about some aspect of what you’re paying for, and if the company providing it can’t give you a satisfactory answer, that can be very revealing.

Bundled into submission
If a company tries to sell you a combination of products in one go, you’ll probably find you end up paying over the odds. Packaged bank accounts are a good example. You may only use some of the perks they offer, and you’d probably be better off buying the ones you need individually.

The art of cross-selling
Many companies grab you with a great value deal and then try to sell you a load of other products that are poor value. The more products you have with them, the less likely you are to go elsewhere. However, few, if any, financial companies have good value products in every category; so be prepared to shop around.

The curse of commission
Salesfolk often recommend a product because they earn more commission on it. Whenever someone tries to sell you a particular financial product, ask what’s in it for them.

Scams and cold calls
No doubt you’ve received plenty of dubious emails asking for your bank details because you’ve won a lottery you’ve never heard of. Or you have received a cold call about an amazing investment opportunity. It’s a cliché but if any financial product sounds too be good to be true, it probably is.

Next we look at what you can do to get out of debt…