Five ways to Beat the Banks at their own Game

If we were to believe the hype the banks put out there you might be forgiven for thinking that banks only had our best interests at heart, but sadly the truth is banks are a business like any other and as such their biggest concern is profits. So today I am going to share some great and effective ways of beating the system.

1.Don’t be a good credit card customer, a good credit card customer as far as any bank or card issuer is concerned, is one who maxis out their card limit and then pays back only the minimum amount each and every moth, that way they have you on the hook for longer and they make a ton of interest off you.

Choose a card with a good reward scheme – for example the American Express Platinum Card, which will give you 5pc cash back for the first three months and then up to 1.25pc thereafter, and set up a direct debit to pay off the balance in full every month. Then buy everything on the card.

By doing this, you’ll benefit from the free insurance offered by your credit card, meaning that if a company goes bust or goods are faulty you can claim back from the bank, and you’ll earn cash back in the process.

2.Switch Banks Today, or at the very least swap your account over for something which isn’t costing you a fortune in bank charges every year, for going overdrawn and for direct debit payments that do not go out because there is no money in your account. These can be as high as £35 for a single slip into the red.

If this is you, take control and ensure you are never charged again. If you think you are disciplined enough to stick within your borrowing limits, take out an account with a 0pc overdraft, such as the current account from Alliance & Leicester. If you can’t, there are specialist alternatives such as credit unions or even basic bank accounts.

3. Don’t make experts fat on commission, Banks will try to sell you funds and other products, some of which have high charges.

Look at whether they are suitable for you before you take them out. You need to check what you are paying for, since more than two-thirds of active fund managers have failed to beat the market’s own performance over 10 years. Advisers get more commission for selling these active investments, but it can be cheaper to hold passive investments such as tracker funds or exchange-traded funds (ETFs).

ETFs are like index funds in that they track the performance of a particular market, but like shares they can be traded on the stock market. Fees are typically less than 1pc a year compared with 1.5pc or more for an active fund. The simplest ones track an index, like the FTSE 100. Check that you are comfortable with this level of risk before taking one out.

4. Overpay your mortgage, if you have spare cash, but still have mortgage debt, you can stop your bank getting hold of the interest you are paying on your mortgage. You don’t have to have a special offset mortgage to do this – many mortgages offer the facility to overpay a certain amount, and you can often get it back if you need to.

If you had a mortgage of £200,000 over 25 years at an interest rate of 3pc, a monthly overpayment of £500 would save you nearly £40,000 in interest over the life of the mortgage. Check the terms and conditions of your mortgage before overpaying – there’s often a limit on how much you can overpay.

5. Lend your own money to the public, This is a bit of a risky one but you can get a much better return on your savings than a savings account with your bank, especially as the interest rates are so low at the moment.

Peer to peer lending is a huge market and there are plenty of sites out there which you can look at, this form of crowd funding allow people to invest in start-up and get in early before they are the next big thing. Make sure you do your research first, and don’t forget you can lose as well as make money in these situations.

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