The financial news you need to know with Sarah Pennells – January 3rd 2018

Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.

Returning Christmas gifts? Can you? Should you?

It’s supposed to be the season of goodwill, but thousands of people will be hitting the ‘return item’ button or trekking to their local high street to give back gifts they’ve received over the festive period. But what are your rights when it comes to returning gifts and what can you do if you can’t take them back?

  1. High street shops (as opposed to online retailers) have no legal responsibility to give you a refund or exchange something just because you don’t like it. However, many will do this and the bigger chains have extended return periods over Christmas.
  2. You’ll usually need a receipt or proof of purchase to get a refund. If you’re returning something to a store that sells its own brand, you may not need a receipt, but you’re only likely to get a credit note for the last price it was selling for. That could be far less than it originally cost.
  3. Watch out for time limits. Some stores won’t let you return items you don’t want before the end of December, and many set a time limit of between 35 and 90 days for Christmas returns. This doesn’t apply to returning faulty goods.
  4. If the present was bought online, there’s an automatic right for the person who bought it to cancel the sale (namely, change their mind) up to 14 days starting from the day after the goods arrive. You then have another 14 days in which to return the item. However, you will normally need the order number and to have an account with the retailer. There are some exceptions – such as anything that’s been custom made.

SAVVY TIP: If you can’t get a refund or exchange something you don’t like, why not give it away to a charity shop? If you’re a UK taxpayer, you can even use ‘Gift Aid’ donations, which means that the charity can claim tax on the gift and increase its value.

Kids’ savings lose value

I don’t normally plug research that my own website has done, but I thought this might be interesting if you have children (or grandchildren) who are looking for a home for their Christmas money.

The inflation rate reached 3.1% in November but we’ve found that only a handful of junior cash ISAs beat inflation. Junior ISAs are tax-free savings accounts that parents can open for their children and there are cash and stocks and shares versions.

Money in these accounts is locked away until the child is 18, although you can switch between different providers to get a better return. There are dozens of different junior cash ISA accounts on the market, but only three available UK-wide (plus one in Northern Ireland only) pay more than the inflation rate.

If your child or grandchild has a junior cash ISA, check the interest rate it’s earning. Some banks and building societies increased rates in December after the Bank of England base rate rise the month before – but not all did.

SAVVY TIP: Check that the junior cash ISA provider you want to move to accepts ‘transfers in’. That’s the term given to money that’s already in a junior cash ISA that you want to switch to another bank or building society. Not all banks will accept transfers.

New build leasehold homes outlawed

If you’ve bought a new house in the last few years, it may have been a leasehold property. Leasehold houses have been sold in certain parts of England for a long time, but have become more common in recent years. If you buy a leasehold house, you only own the building for the length of the lease (which is typically between 99 and 125 years).

You also have to pay an annual charge called ‘ground rent’ to the freeholder. This can be quite low, such as £100 a year, but some freehold houses let the freeholder double the ground rent every ten years.

SAVVY TIP: The clause that allows a landlord to double the ground rent every decade might not seem like a big issue if it’s set at a low level. After ten years, for example, a £100 ground rent would only be £200 and after 20 years, it would be £400. But in some circumstances future buyers could be put off. If, for example, you own a leasehold house where the ground rent started at £250 and the lease has already run for 30 years, the ground rent would be £1,000 when you sell and would double again to £2,000 after another ten years.

Just before Christmas the government said it would ban the sale of new leasehold homes, except for certain properties, such as shared ownership and retirement housing.

While this is welcome news, it won’t do anything to help those who recently bought a leasehold house – something I think the government should have tackled at the same time.

Worried about your credit card bill?

No sooner are the Christmas lights cleared away then January credit card bills start arriving on the doormat (or – more likely – email inbox). Most people spend far more on their credit cards in December than any other month. So if you can’t clear your bill in full, how can you make sure you’re not lumbered with credit card debt for months to come? Here are my tips:

  1. Switch to a 0% balance transfer deal if you can. This will mean you won’t pay any interest on your credit card balance. But it’s not zero cost because there’s a balance transfer fee of, typically, between 2 – 3%.SAVVY TIP: You can find out which credit card deals you’ll likely qualify for before you apply by using Noddle’s Credit Card Matcher. Several credit card providers will also tell you in advance whether you’re likely to qualify for their card.
  2. Draw up a plan so you know how much you have to pay off each month to make sure you’re debt free by the time the 0% balance transfer period runs out.
  3. If you can’t transfer your credit card balance, pay as much as you can afford each month to reduce the amount you owe. If you have store cards as well as credit cards, start by paying the most on the card that’s charging the highest rate of interest (normally a store card).
  4. If you usually only pay the minimum, pay a little extra as it really will make a difference. For example, if you owe £1,000 on a credit card, charging an average rate of 18% APR and you pay the minimum each month (typically £25 a month initially – reducing as you pay off the balance), you wouldn’t pay off your card for over 17 years. But if you pay an extra £25 a month, you’d be debt free in less than four years.

SAVVY TIP: If you’re really struggling with your debts, contact a free to use debt advice charity such as Stepchange, National Debtline or Citizens Advice Bureau.