Off on holiday? Don’t buy currency at the airport
Now, if you’re off on holiday, you and I both know you shouldn’t buy your currency at the airport. That’s a sure-fire way to get a rubbish (not a technical term!) exchange rate.
But some of us still do it and it could mean you have a little – or a lot – less to spend when you’re abroad. The good news is that you can leave it until the last minute (pretty much), but still get a good deal. Some providers of foreign currency will let you order up to a few hours before you travel, will give you the online exchange rate and let you pick your currency up at the airport or ferry terminal.
So, here are my tips for getting a good deal on currency:
- Buy your currency in advance online and either pick it up at the airport or get it delivered. Watch out for delivery costs as you can only normally get free delivery if you order more than £400 – £500. Otherwise you’ll have to pay a fee.
- Book currency now if you’re worried about the value of the pound falling further. Some currency providers will let you cancel your order with no penalty and others have a price promise so you can get paid the difference if you find a better rate elsewhere.
- Don’t get swayed by the words ‘commission free’. That’s not where foreign currency providers make their money. They make it on the difference between the price they buy at and the price they sell at.
- You’ll pay interest from day one if you pay for foreign currency by credit card. There are one or two exceptions where you can use a supermarket-branded credit card to buy currency from their own brand bureau de change and you won’t get charged interest.
Adults sleepwalking into decades of debt
Exclusive research carried out for my website – SavvyWoman.co.uk – shows that 97% of adults don’t know how long it will take to clear a £1,000 balance on a credit card if they only make the minimum payments.
If you have a credit card charging a typical interest rate of 18% and make minimum payments (typically 2.5% of the balance, so £25 to start with), it would take 17 years to pay off the balance entirely. Yes, 17 years!
But our research shows that 97% of people get this answer wrong. The most popular answer was five years, with 23% of people giving this answer and a further 17% thought it would only take three years to become debt free.
It’s estimated that 1.6 million people repeatedly make the minimum payments on their credit cards. This means they could be paying a lot more interest than they realise and taking longer than they expect to become debt free.
If you’re one of them, there is some good news – namely, that you can be debt free years earlier if you just pay a little extra every month. If, instead of paying £25 a month you pay £50 a month, you’d be debt free in less than three years (assuming you owe £1,000 on a card charging 18% interest).
So here are my tips for using your credit card wisely:
- Credit cards can give you a lot of benefits. You get really good consumer protection if you pay by credit card because you can claim against your card provider if goods don’t arrive or the retailer goes bust.
- It’s obviously best if you can pay off your balance in full every month and over 60% of people do this. If you time your purchase well, you can get up to 56 day to pay without being charged any interest. This interest-free period will depend on the card provider – and some have a much shorter interest-free period than others.
- Don’t – whatever you do – only make the minimum payments. Even on a £500 balance it will take you around 12 years to pay it off if you only make the minimum payments (again, assuming you’re paying 18% interest).
- Never, ever use your card to take out cash. You’ll start paying interest from day one, even if you pay off your balance in full.
Over four in ten parents don’t have life insurance
New research shows that 4 in 10 parents who have children aged 18 or under don’t have life insurance. Life insurance is designed to pay out when you die (a grim thought, but it’s a really useful policy for many). Not everyone needs life insurance but it’s definitely worth getting in some circumstances.
SAVVYWOMAN TIP: Life insurance needn’t be expensive – but the costs will depend on your age when you take it out, your medical history, your job and how much insurance you want.
Here are some groups who should consider getting life insurance:
- Joint homeowners: If you have a joint mortgage with someone else and die without leaving a way of paying it off, the other person on the mortgage will be responsible for paying off what’s owing. If you have the right life insurance, you can ensure that the mortgage is cleared when you die.
- Parents: if you have young children, life insurance can pay for the costs of childcare (and school fees, if they go to private school) if one parent dies.
- Couples: if you don’t have children or a mortgage, you may not need life insurance. But it’s worth working out what would happen to your finances if one of you were to die. If that would leave a shortfall in income, it’s worth considering life insurance.
SAVVYWOMAN TIP: Most employers provide some life insurance (called ‘death in service’ benefit), but it will only pay out if you die while you’re still employed by the company. It’s also generally between two and four times your salary, which may not be enough to give the cover you need.
Thousands miss out on more pension income
Since April 2015, anyone with a pension that isn’t linked to their salary (such as a final salary scheme) has been able to take money straight out of their pension pot. Previously, most people ended up buying an annuity, which converted a pot of money into a regular income for life.
Unlike most financial products, once you take out an annuity you can’t generally switch to another one if a better rate comes along.
An investigation by the regulator, the FCA, has found that thousands of people who have a health problem could be missing out. That’s because pension companies generally pay a higher income if you have a medical or health issue (the reason is that you’re not likely to live so long), as long as you buy a special type of annuity called an ‘ill health’ or ‘enhanced’ annuity.
The regulator has told pension companies to contact people who have missed out and pay them compensation. Meanwhile, if you’re thinking of taking out an annuity, make sure you shop around and ask any company you’re thinking of taking an annuity out with whether or not they sell annuities that pay a higher income if you have a health issue.
SAVVYWOMAN TIP: If you’re aged 55 or over, you can get free guidance online or over the phone from a government backed organisation called Pension Wise. You can book an appointment over the phone by ringing 0800 138 3944 or online at pensionwise.gov.uk