- 1. I'm better off keeping my money under the mattress. It's easy to feel exasperated with low-paying savings accounts. According to Abbey, we keep £5.4billion in cash hidden in our homes. It's not at my place, I can assure you. But apart from this cash earning nothing at all - not even putting you in line for a Premium Bond win - you run the risk of theft, fire or loss and will probably find that most home contents policies only insure about £500 in cash in the home.
- 2. I can't switch banks because I have an overdraft. Rest assured that there are many banks other than your own who would love to take the interest you pay on an overdraft and (assuming you can demonstrate an income) would be happy to let you switch it them.
- 3. Paying bills by direct debit is always cheaper. Well this is certainly true with utilities. In fact recent research by Uswitch shows that you can save more than £200 a year by paying DD. However this works against you with car insurance, where you will almost certainly be charged more for paying monthly, usually around 20% more.
- 4. If I lock away my savings in a long notice account I get a better deal. This used to be the case but it is increasingly rare these days. Before you sign up to a notice account, take a look at no-notice accounts and see if there is any difference. You could be pleasantly surprised. Current offers on Moneyfacts.co.uk include the Chesham Building Society's Reserve 120 account which, as the name suggest, requires 120 days notice for withdrawals. It pays 2.85% AER compared to the 2.80% AER paid by the no-notice West Bromwich Building Society Saver Direct account.
Mortgages
- 5. I'm renting out my property but don't need to tell the mortgage company. Just about every mortgage contract will require you to notify the lender if you plan to rent out your property. In some cases the lender will allow you to remain on the same rate but other lenders may switch you onto a buy-to-let loan (which is usually higher), particularly if you're planning to rent out the property for a long or open-ended period. You may be tempted to just not tell them but you run the risk of invalidating your insurance if anything goes wrong.
- 6. I have a nice cheap mortgage because it's interest-only. Yes, your monthly payment will be cheaper but if you fail to save and/or invest for repayment of the capital then you will lose your home. Personally, I am convinced that we will see a big wave of horror hitting interest-only fans in the next couple of decades as their mortgage terms expire but they have no way to pay down the capital. Aim to switch to a repayment mortgage as soon as you can afford to.
Credit and debt
- 7. I need to pay a specialist to get my credit rating repaired. No, no, no. I promise there is nothing that a paid-for service can provide that you cannot do yourself for FREE. It won't happen overnight though. There are three credit reference agencies, Callcredit, Equifax, and Experian, which store information about your credit history. Missed credit repayments stay on your credit report for 36 months, while County Court Judgments are held on file for six years. If you have paid the debt within one month of the CCJ, you can ask the court to remove the details from your record. Get copies of your records (a small fee will apply unless you use a free trial) and the credit reference agency can provide plenty of free tips and advice on how to correct any errors and improve your credit record.
- 8. The more credit cards I apply for, the better my credit rating will become. Not so. Although having no credit at all can be a problem, lenders will also be put off if you have lots of declined applications. This could signal that you're desperate for credit or having trouble managing your money or existing cards. When you're shopping around for credit, you can ask lenders for a 'quotation search', rather than making full applications.
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