Bank Accounts: Things to Watch Out For

Banks and building societies are in business in order to make money from their products and services. Which means that there are things that you should look out for when it comes to choosing your bank account.

Monthly fee

A number of accounts require a monthly payment, usually in return for other benefits, which are usually offered as a package deal. At times, paying the fee could save you money if it involves a lower overdraft interest rate or other money-saving initiatives, but take note that free banking is still available widely, so do not pay for things that you do not actually need.

Interest

Interest rates that are similar to – or even better than – some savings accounts are currently available on current accounts. However, these will normally only apply to a portion of your account balance, and usually up to a set limit, so you may be required to maximise your returns by depositing money above this limit in a separate savings account.

You will also typically be required to pay in a minimum amount every month in order to qualify for the interest rate that was advertised.

Overdrafts

Basically, overdrafts, are a form of credit: they are a facility that permits you to overspend, so it should be avoided too as much as possible.

Make sure that you are able to understand the terms of your overdraft facility. There are two kinds of overdraft:

  • Arranged overdraft – the bank agrees to an amount by which you can go overdrawn.
  • Unarranged overdraft – you either go overdrawn or exceed your arranged overdraft without having an arranged overdraft.

The interest rate that is charged on your arranged overdraft will normally be less than an unarranged one. Rates for unarranged overdrafts are often around 25-30% per year.

Some accounts may also impose a fee every time that you are overdrawn. Other accounts waive interest rates altogether and only require an overdraft fee.

If you do not have an overdraft facility (which is the case for basic bank accounts), it is very important to ensure that you have enough money in the account to satisfy payments, as a fee may be charged if a payment cannot be made.

Cash withdrawals

Almost all bank accounts provide you with a cash card so that you can withdraw money from cash machines. Majority of transactions will be free of charge. However, if you use cash machines in places like amusement arcades, petrol stations, or nightclubs, a fee may likely be charged.

It is worth understanding what type of cash card you will receive and whether it is widely accepted.

Real also: Can You Still Receive a Decent Return on Your Savings?

What is a Net Rate?

What does a net rate mean?

Net rate is the rate of interest that you receive on a savings account after tax (specifically after the basic rate tax of 20%, or the VAT) has already been deducted.

You may notice a net rate of interest shown by some banks and building societies on websites or literature. However, as interest is now paid without the deduction of tax, net rates may not be so well broadcasted (however, they are still important if you earn more interest than what your Personal Savings Allowance allows).

As with the gross rate, the net rate shows you what you would receive at the beginning of taking out the savings account. Compound interest (where you receive interest on your original investment and any accumulated interest thereafter) is not taken into account, and nor does it give an annual rate like an AER does, if the savings account that you are looking at has an introductory bonus of less than a year.

A net rate usually only reveals the rate of interest that you would receive at the outset if you are a basic rate taxpayer, so if you pay a higher rate or an additional rate tax, it can be a misleading comparison. Remember that if you are a basic rate taxpayer, the personal savings allowance means that you can earn £1,000 in savings interest per tax year before tax is deducted (if you are a higher rate taxpayer the amount is £500, and if you are an additional rate taxpayer, you do not get a savings allowance at all).

In order to determine what your personal net rate of interest is, you would need to deduct your tax rate (higher rate at 40%, additional rate%, 45%, the basic rate at 20%) from the gross rate.

For example, if the gross rate that is offered by a savings account is 3.00% and you are a taxpayer with a higher rate, you would do the following calculation:

3 – 40% = 1.80%

Making use of your own “net rate” is also an excellent way to compare the gross rate on a cash ISA against a non-ISA savings account.

Personal Loans: Key Factors to Consider

As with any financial product, there are basics that you must consider to make sure that you are getting the right unsecured personal loan.

Our step-by-step guide will assist you in considering all the options that are open to you.

Secured or unsecured?

  • Personal loans or also known as unsecured loans usually allow you to borrow a maximum of £25,000. Some will now let you borrow more.
  • Unsecured personal loans do not have as much risk to the borrower as a second charge mortgage (or secured loan). However, if you default on your repayments, it will have an effect on your credit rating, and you will find it difficult, and definitely expensive, to get credit in the future.
  • If you are looking to borrow over £25,000, most lenders will require security such as property, which means that you will have to go for a secured loan which is also known as a second charge mortgage. These will need a property as security, so if you do not have a property or if your property has no equity, you are restricted to an unsecured loan only. Secured loans are only available to those with an existing mortgage.
  • Beware! If you go default on your secured loan repayments, the lender can file for a repossession of your home, so banks will get their money back one way or the other.

Are you getting the best loan rate?

  • Interest rates for personal loans are priced in advertising and on your credit agreement as an Annual Percentage Rate (APR). All lenders should determine the APR based on the same calculation so you can be able to compare the cost of the loan.
  • Lenders will have various APRs for different tiers of borrowing. However, their lowest rates will tend to be for mid-range or higher borrowing amounts.
  • Adverts for credit, which includes personal loans, have to value a Representative APR, which should apply to at least 51 percent of people who apply as a result of the advert. The actual APR that you are offered will depend on your personal circumstances. The more ‘creditworthy’ you are, the lower the rate you will be offered.

Monthly loan repayments

  • Obviously, you will need to ensure that you can satisfy the monthly repayments. Unsecured personal loans are on a fixed rate basis, so you will know what your repayments will be throughout the loan term. Secured loans, on the other hand, tend to be on a variable interest rate, so make sure that you can cope with any changes in the interest rate on both your first and second charge mortgages.

Do I need insurance to cover my loan repayments?

  • Loan payment protection can be an important insurance to have as it can secure your loan repayments if you are unemployed or sick. However, do not buy the PPI that the lender offers you. Compare payment protection products or go to an independent broker who can give you a better product which is best for your needs. Beware! Always understand the small print of the policy before you take out the insurance.

Upfront fees

There may be upfront fees that you will be required pay. Determine whether these are worth paying, because if they result in a lower repayment, they may signify good value. Remember to factor in any interest that you would have earned on the money if it was in your bank account instead.

Personal Loans Guide

Personal loans (or unsecured loans) is a method of borrowing money from a bank or building society, which you can use for any legal purpose (even though most lenders stipulate that the loan should not be used for commercial purposes). You choose the amount you wish to borrow and the period of time you want to repay the loan over, and the rate will be set accordingly. You then make regular monthly repayments to pay back the full amount of capital plus interest.

As each repayment includes an element of both the capital and interest, you are assured to repay the loan at the end of the term, provided that you make all the payments on time.

Different loan types

Unsecured personal loans are usually available for between £1,000 and £25,000 over the terms of one to seven years. You are not required to put your house or other property up as security.

Secured loans work the same way, but are secured with your property, so you run the risk of having your home repossessed if you do not make the repayments.

Specific loan types, like home improvement loans and car loans, are just unsecured personal loans that go by another name.

How lenders make their money

Loan providers earn money in three ways:

  1. Interest – You are required to pay a rate of interest on the loan which represents the lender’s profit on the loan itself.
  2. Fees –set-up or arrangement fees are charged by some loans. If you want to repay the loan early, you may be charged an early repayment fee, and if you miss a payment, you can expect a missed payment fee to be charged.
  3. Associated products – other products may be offered by lenders, such as payment protection insurance generates an income for them.

What next?

How much do you need to borrow? Choose how much money you really need to borrow and the term of the loan. The primary rule is to borrow as little as possible and pay it off in the shortest amount of time.

How Will Your Finances be Affected by Brexit?

Uncertainty regarding the Brexit terms has led to fluctuations in the British economy. Here is a look at how Brexit could impact your finances.

Employment and benefits

Unemployment rates have decreased compared from last year: 4.8 percent compared to 5 percent in February 2016. This implies that Brexit has had little effect on job opportunities so far.

However, the effect Brexit will have on the employment and benefit payments in the United Kingdom is still speculative:

  • If the economy grows, opportunities for employment and wages could increase and benefit payments would possibly stay the same.
  • If the economy shrinks, there could be a rise in unemployment and wages may not be able to keep up with the cost of inflation. Benefits payments may also be decreased.

It will take at least two years for Britain to leave the European Union once Article 50 is triggered. Any changes to benefits payments or unemployment will depend on the economy’s overall performance.

House prices

Rightmove, a property website, has revealed that annual house prices are increasing at the slowest rate since April 2013.

However, the Halifax House Price Index publishes that house prices actually decreased by 0.9 percent between December 2016 and January 2017.

House prices are displaying no signs of drastically dropping yet; which is good news for existing homeowners, but are, however, less promising for first-time buyers.

Travel

Leaving the European Union could have an effect on the cost of your holidays and the level of consumer protection that you enjoy abroad:

  • Flight prices: Britain will be required to renegotiate regulation on air traffic, as part of a revised trade agreement when it withdraws from the European Union. This may mean that budget airlines will increase their prices to compensate for the restrictions on travel routes, and the pound’s instability.
  • EHIC: free or low-cost healthcare in other European Union countries are offered to citizens of the United Kingdom by the European Health Insurance Card (EHIC) Kingdom. This benefit may be removed when Britain leaves the European Union, and the cost of travel insurance could increase.
  • Travel money: The rate of the pound against the euro has been unstable since the Brexit vote, and it presently stands €1.14. It is more necessary than ever to shop around to ensure that you get the most for your money.
  • Mobile phone charges: The price of using your mobile phone abroad could increase, as caps on roaming charges may not anymore apply once Britain has left the European Union.
  • Flight delay compensation: If you experience long flight delays, European Union regulation currently entitles you to a maximum of €600 compensation. However, after Brexit, there is no guarantee that these rights will continue to protect British travellers.

Food shopping

The prices of your weekly food shop could increase, because of our reliance on food that we import from European Union countries and the weakening pound.

According to a research made by mySupermarket, food prices increased at the end of 2016 but were still 3 percent lower than they were in December 2015.

The amount that you pay for your weekly shop may be dependent on which supermarket you use. For example, Aldi and Lidl’s prices look to continue to be unchanged since they stock a small variety of products, and they do not sell branded goods.

Energy prices

Ofgem has put price caps in place for prepayment energy customers. However, energy prices are still increasing. The energy providers that are listed below are said to be putting their prices up in March 2017:

  • Scottish Power standard dual fuel will increase by 7.8%
  • Power standard dual fuel will increase by 9.8%
  • EDF electricity prices will increase by 8.4%

While British Gas has pledged to freeze their energy prices by August 2017, this is not likely to provide a long-term solution to increasing energy bills.

Changing your energy supplier ahead of price increases could help you save a lot of money on your energy bills every year.

Fuel prices

The AA’s Fuel Price Report reveals that the price of fuel has risen since the Brexit vote.

The United Kingdom average in June was 111.6p per litre. It has currently increased to 116.3p per litre.

Smartphone apps like Waze can assist you in looking for the cheapest fuel prices in your area. Shopping around for car insurance can also help you to save money on the cost of running your car.

Savings

The Bank of England has frozen its base rate at 0.25 percent as a response to Brexit, which means that interest rates on UK bank accounts have decreased.

Santander and Lloyds Bank have decreased interest rates on their current account credit balances. And Halifax and RBS have reduced packaged account rewards from £5 to £3.

Fixed term accounts could offer you a higher rate of interest. However, they tie up your money for a fixed period of time.

What about stock market investments?

The drop in the value of the pound has boosted international investments.

However, brokers consider that shares in UK businesses could drop since foreign traders are hesitant to invest in an economy that is unstable.

Pensions

Moneyfacts have confirmed that last year, current pension funds witnessed their highest returns since 2009.

However, the Office for Budget Responsibility foretells that pensioners could be worse off in the next five years.

The pension adviser of the government has also warned that the state pension age may be pushed up because of the Brexit. If migration is greatly limited, people in the United Kingdom may have to work into their mid-70s before they can retire.

 

 

How to Spend Less on Entertainment

In this guide, we tell you how to spend less on the things that you enjoy doing most, as a hobby, on your own, or with friends.

Cut the cost of the Cinema

Get a cinema membership

There are two main cinema chains that grant cinema memberships, Cineworld and ODEON.

You pay for each membership via a monthly direct debit, typically for a 12-month term, and you have the opportunity to watch as many films as you can every month.

If you just go to the cinema once or twice a month at most, then this method may end up costing you more than paying every time you go.

Choose the right day

Many cinemas give discounted screenings at specific times of the week – whether this is an evening of the week or weekday mornings when they are usually quiet such as described on the Vue website and the Empire website.

Save on tickets for live events

Look for cheap tickets

Do not just buy your ticket at face value; there are a lot of sites that will offer the same ticket at a portion of the price.

Once you decide on what or who you want to see, visit the following sites:

  • See Tickets
  • Lastminute.com
  • Theatre Monkey
  • Ticketmaster
  • Seat Choice
  • Ticketline
  • Comparetheatretickets.com

While you are visiting these sites, it may also be a great idea to sign up for their newsletters so that you can be informed of new tickets and deals as soon as they are available.

Remember to consider booking fees and the like when you analyse prices so that you can make sure that you are getting the best deal possible.

Check at the box office

Avoid handling or booking charges by personally going to the box office to check prices.

If you can,  try to book directly as you will usually be charged more in fees when you book using a third party.

Second-hand tickets

Various sites now give you the chance to purchase your ticket as-new, second hand over the internet.

Visit the following sites if you are trying to book sold out tickets:

  • Seat Wave
  • Get Me In
  • Gigantic
  • Viagogo
  • eBay
  • Gumtree

Remember to make sure that you are buying from a legitimate seller.

Save on nights out

Cheap drinks

Make sure that you plan your evening to include clubs and pubs with special offers, like 2-4-1 cocktails and happy hour.

Book in advance

Many clubs will give you a discount if you book with them in advance. You can either visit them directly or call them on the phone to negotiate for a lesser price.

Discount restaurant meals

There are various restaurants that will give 2-4-1 dinner deals or 2-3 course meal for a lower price.

You can visit websites such as Tablepouncer.com, that allows you to reserve last minute tables in selected locations across the United Kingdom for a discounted price.

Bring your own bottle

Some restaurants allow you to bring your own bottle, which can be much cheaper than buying wine there, so verify if this is allowed before you go.

To look for a restaurant that allows you to bring your own, visit the Wine-pages website.

Save on days out

Free days out

You are spoilt for options when it comes down to heritage and culture across the United Kingdom, and the best part about the options is that they are normally free!

You can look and plan a variety of free activities using the following websites:

  • VisitWales.com
  • VisitEngland.com
  • VisitScotland.com

Festivals

Going to festivals can end up being an expensive affair. However, there are ways for you to decrease the cost, from start to finish, in every possible way.

Cheap spa days

There are competing deals that are often available for spa days and weekends. Visit websites such as Wahanda to see if you could save money while pampering yourself.

Cheap and fun nights in

Free TV & films online

You can just sit back and enjoy a broad range of television programs and films from the comfort of your sofa with services administered by services like Netflix and Amazon Prime, which require a monthly subscription fee.

Read: Where to Watch Free TV and Films Online

Cheap gaming

If you are one of those that enjoy gaming, then there are various ways to get yourself a console and games without spending too much. Opt for bundle deals, or look to buy pre-owned, to get the most for your money.

Save by eating in

Visit websites like Hungry House or Just Eat for deals at your local takeaway and sign up for their newsletter so that you can find out about special deals and promotions.

How to Write a Budget

Learn to manage your money and find out what you are spending it on each month. Here is a guide on how to draw up a budget to stay on top of your finances.

Why budget?

Drawing up a budget will make it easier for you to manage your money and will make sure that you are not caught out by unexpected expenses.

It will help you examine whether you spend more than you earn, and provide you with a concept of what you can afford to spend.

This should assist you in finding a clear and simple way to spend less money than you make.

Tips for writing up your budget

Before writing your budget, use the following tips to make sure that you have everything you need:

  • Be as accurate as possible: When you have to make an estimate, it is better to overestimate your amounts rather than underestimate them
  • Work out when bills go out: If many of your expenses go out monthly, calculate your income and expenses as monthly figures
  • Take your time: You need to set aside time to write a budget in order to make your budget as accurate as possible and so that  you can give it your full attention
  • Get all your paperwork: You will require all the documents that reveal your income and expenses, for example, utility bills, receipts, and bank and credit card statements.
  • Think about the purpose of the budget: For example, if it is for you and your partner, make sure that you draw it up together and include both of your incomings and outgoings

Step by step budgeting

Follow these steps when you write your budget to ensure that your results are accurate:

  1. Determine exactly what you earn: Make use of your payslips to enter your salary after tax, and include any second jobs that you have. Ensure that you include any benefits that you receive.
  2. Don’t duplicate your outgoings: Be careful to only include your bills once. For example, if you pay for your TV, home phone, and broadband together, just enter the total cost.
  3. Include one-off spending: Even if they are not considered as a monthly cost, you need to include one-off purchases like a new boiler or car. Determine how much you spend at Christmas and divide it by 12 to determine a monthly amount.

What do your results mean?

When you have recorded all your incomings and outgoings, you will be provided with a total that reveals how much you are over or under spending every month.

If you have a negative total

This means that you spend more than what you earn, It reveals that you are living beyond your means.

If you have a positive total

This means that you earn more than you spend, It reveals that you are in a good financial position.

It is still worth checking if you could be saving money, since you may be spending more than you need to.

If you have a positive total, think particularly regarding what to do with the extra money that you are not spending. You could:

  • Invest your money
  • Deposit your money in a savings account or ISA

 

Family or Friends, Who Should You Borrow From?

When you need money, the first thing that may come into your mind is to ask your friends or relatives. However, you must weigh carefully about whether you can manage to return it and can deal with what might follow if you cannot.

Pros and cons of loaning from family and friends

Asking your family may be the easiest way to borrow money. They can give emergency cash and help you dodge borrowing with extremely high-interest rates, such as doorstep lending, bank loans, and payday loans.

If both parties are confident it will not destroy a relationship with a family member if you cannot pay back, this is the best choice as it is usually free of interest.

If you are borrowing from a friend, be conscious that if you do not return the money, this could end your relationship with your friend.

Work out a budget ahead

If you want to ask a family member or a friend, make sure you have drafted up a budget to see how much cash you have left after clearing your living expenses.

Look at your current-account and credit-card records from the last three months, and think carefully how much you can borrow.

What if you cannot repay?

It can be stressful if you cannot manage repayments, but it can be even worse if you are leaving a someone out of budget as it might endanger your relationship.

That is why it is necessary to form out your budget and create a new payment plan as soon as you see yourself in distress.

The first thing you may need to do is to let them know what’s happening to show them that you are an honest person and that paying them is your primary concern.

Here are some other tips that will assist you if you are coping with debt:

Other ways of borrowing money

If you are unsure whether or not you should loan from a family member or a friend, there are other alternatives even if you have a bad credit standing.

See: The UK’s Top Debt Solution Providers

Things consider before lending money to friends or family

If someone asks for financial help, especially if it is a family member or a friend, it can be difficult to decline.

However, there is no point going into hardships yourself because you want to help, or because you feel sorry for not helping. On the other hand, maybe you cannot afford to sacrifice your relationship with them just because of money.

Can you afford it?

Work out your budget before lending to anyone. Consider everything you lend as gone. Be sure that even if someone cannot repay you, you would still be able to pay all your living expenses comfortably without borrowing from anyone.

Can they afford it?

Encourage the would-be borrower to draft out their budget, just like what you would be doing. Remember that if they cannot repay you, this may cause financial trouble for yourself or worse, your relationship with them

What will you do if the borrower cannot pay?

You might be certain the person you have lent funds to will be capable of paying it back in full, but you must study what you will do if they cannot; this is a very personal decision, so take your time and think about this.

How formal should it be?

Always keep in mind that whatever you or the would-be borrower says can be denied. Get something in writing when you are lending to family members. Do not be embarrassed by this as this is very common.

Know that if you lend money to family and friends on a regular basis, you might need to be documented by the Financial Conduct Authority (FCA).

In case the borrower died with an outstanding debt, having a formal contract can protect you. Contracts can be used as a proof to claim from their estate.