Ten tips to navigate the banking maze05 Jul 11 07:00AM EST |
Just like changing the oil on your car, your finances also often need maintenance to run smoothly. Here are 10 fast and effective ways to ensure your accounts are in order.
1 Pay your mortgage fortnightly It’s an old trick, but can save you big bucks. If you aren’t paying fortnightly, you could be missing out on savings of $67,000 or more (based on a $250,000 loan at 7.5% interest). Because there are 26 fortnights in a year, it’s actually just an easy way to make extra repayments, and if paying fortnightly is not an option, try adding $10 to your payments. This can save $16,000 over the life of a loan using the above scenario.
2 Negotiate a better deal A big part of CHOICE’s Better Banking campaign is about getting in touch with your bank and demanding a better deal. Bank’s know it costs a lot more to attract new customers than keeping existing ones. By doing some quick research, you might be able to garner a better rate just by calling your bank to negotiate.
3 Assess your needs Personal situations change all the time, and so does the market. For this reason, you should plan some periodic checks on your home loan. If you’re home loan comes with a lot of bells and whistles that you don’t use, you can probably save money by switching to a more streamline product. Alternatively, if you have savings sitting around, you may want to consider a home loan with an offset account to save money. Have a think about your needs, and consider independent financial advice if you’re unsure.
4 Horses for courses Credit cards can cost you enough money without having the wrong card for your needs. If you don’t pay the balance in full regularly, switch to a low interest card. If you do, use a card with no annual fee and save money for more important things.
5 Rewards cards You need to spend a lot and pay off the balance in full without fail to earn even a basic reward with many cards. A monthly spend of $1000 on your card, will typically return less than $100 in rewards for most cards once you factor in the annual fee, and some cards will actually see you return a loss – an experience that most will find less than rewarding.
6 House of cards The transactions you perform using a credit card are layered. Payments attracting the most interest sit at the bottom, earning banks the most money before you get to repaying the debt. For example, if you make a cash advance (usually a higher rate of interest) of $100 at an ATM, and then swipe your card in a store for $1000 of purchases (often a lower rate of interest), you will have to pay off the $1000 before being able to repay the original $100.
7 Giving money away CHOICE estimates banks earn at least $7.3 billion from people leaving money in transactions accounts that earn little or no interest. While transaction accounts are important for daily funds, if you have extra cash in your transaction account, switch it to a high-interest savings account. Many banks offer a linked savings account so that you can transfer your money instantly when you need it.
8 Fee bonanza Despite earning money on interest, banks raked in a whopping $1.2 billion in fees on transaction accounts in 2010. If you’re paying a monthly fee, switch to an account with no fees or charges for accessing your own money.
9 Avoid ATM fees ATM fees can be just as punishing to your monthly balance. Plan ahead and use your provider’s ATM, or consider an account like ING’s Orange Everyday that will let you access any ATM as long as you draw out $200 or more. If you’re going overseas, consider getting a dedicated travel card that you can load up with different currencies and avoid overseas transaction fees.
Compare, Ditch and Switch
10 Find a better deal the easy way Whether it’s a home loan or credit card, doing some research doesn’t have to take up your entire Sunday. CHOICE’s completely independent website Compare, Ditch and Switch rank’s products using objective criteria and allows you to compare almost all of the products available on the Australian market.
If you have some more tips on how to get your financial house in order and save money please share them with us through the comments below.