Started the new year with a goal to save money? Take a look at what you're paying your bank and insurer to begin the search for savings.
Fees provide lucrative income for banks. Last year, they earned $2.3 billion from fees and commissions they charged to customers.
But some fees you can avoid. Start the hunt for savings by looking at your everyday transaction account. Over a year you could be paying your bank hundreds of dollars in fees, some of which could be avoided.
First up, ask your bank if you qualify for any fee exemptions on your transaction account. No joy? Then look at what other banks will offer.
If you have a mortgage with your bank, you should be able to haggle to pay no monthly fees.
You should also be exempt if you have term deposits or a decent pile of savings. Regular deposits or having a minimum monthly balance can also strengthen your case to get fees scrapped.
Banks usually offer exemptions for children, students, new graduates and those aged over 65. However, these sometimes come with provisos, such as having your NZ Super paid into your account.
If you don't qualify for an exemption, look at how you're using your account. Add up the number of transactions you do each month. If you have a lot of payments going out, then an account with a flat monthly fee will usually be a better option than one that charges per transaction.
The number one rule with a credit card is to pay off your balance in full each month. Otherwise you'll be paying high interest charges – about 20 per cent – on money owed.
Don't be tempted to pay just the minimum – minimum payments are designed to benefit the bank, not you, and mean your debt will take much longer to pay off.
The other trap with credit cards is the annual fee. It can be steep, particularly if your card is linked to a rewards scheme.
The big lesson with credit card rewards schemes is they only really reward big spenders. Unless you spend more than $25,000 every two years – and pay off your card at the end of each month – most schemes won't be worth it. You can save yourself money by switching to a card with no (or a low) annual fee.
If you do end up in the red, switch to a card with a low-interest rate or look at a balance-transfer option. Banks regularly promote balance-transfer offers, which let you move the debt from your existing card to another bank's card and, for a fixed period, you pay reduced or no interest on the amount transferred.
To make these offers really work, you need to pay off the debt within the fixed period. Work out a budget to pay off your card debt. There are local budgeting services that can help. Don't use your card until the debt is repaid – any new purchases will usually be charged interest at the standard rate.
Insurance is a growing household expense. Over the past decade, the cost of home insurance has risen by 144 per cent and contents cover by 41 per cent.
It's easy to "set and forget" your insurance – but that's exactly what you shouldn't do.
Our surveys show there are significant price differences between insurers. For example, our latest survey of car insurance found you could save as much as $800 a year by switching companies.
If you've got dependents and are paying for life insurance, it's also important you review your cover regularly. At a minimum, life insurance should cover your debts, funeral expenses and your family's immediate living costs if you're no longer around.
However, the life cover you need will change over time. When you have a young family and a sizeable mortgage, the amount will differ markedly to what you need when the kids have left home and the mortgage is nearly repaid.
When you review your insurance, think about the risks you need to cover. Check your policy to see what you're getting for your money. Pay close attention to the exclusions – the things that aren't covered – to help weigh up whether you're getting a fair deal.
In the life insurance market, commission-based selling has led to consumers being oversold cover and you may be paying more than you should for a policy that provides little value. If your insurer isn't delivering good service, look for a company that promises better.
• When you get your annual renewal notice, check if you could save by switching companies.
• Shop around for cover – get at least three quotes. Premiums can differ by hundreds of dollars.
• If you're unsure about anything, ask and get the company to explain its advice to you in writing, particularly the exclusions and any restrictions on cover.
• Regularly review how much cover you need, especially after major life changes such as marriage or divorce, having children, or children leaving home and becoming independent.
• If you're changing insurers, don't cancel your old cover until you have been confirmed as a customer of the new insurer.
- Consumer NZ