The Financial News You Need To Know with Sarah Pennells – September 2015

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.

Easier current account switching – 2 years on

It’s been two years since ‘seven day switching’ was introduced. This meant you could switch your current bank account in seven working days and – crucially – that the bank you moved to was responsible for making sure it all went smoothly.

Research by a price comparison site has found that people who switch are most likely to do so for ‘in credit interest’. At a time when interest rates on savings accounts is woefully low, it’s probably not surprising that the prospect of earning up to 5% on money in a current account, either for a limited time or for a limited amount, is appealing.

SAVVY TIP: Bear in mind that some current accounts only offer the high interest rate for the first 12 months and most insist that you pay a certain amount into your account and/or set up a number of direct debits to pay your bills.

It’s not the only reason to switch account though. If you regularly go overdrawn, you may be able to save a lot of money by switching to a bank with low arranged overdraft charges.

Prepaid cards for teens

New research shows children who don’t shop with cash are more likely to use a prepaid card or mobile phone than an ordinary debit card. A survey found that of the 26% of children who used a mobile, bank account or prepaid card to spend money, over half (58%) used a prepaid card and 40% used a debit card linked to a bank account.

There are a number of prepaid cards available aimed at the teen market; the idea being that the child using it can’t spend money they don’t have and, with some cards, parents can set limits on where their child can use their card and what they can spend their money on.

SAVVY TIP: If you’re thinking of signing up to a prepaid card for your child, make sure you check the charges. Some charge an annual fee, others a monthly one. There may be charges if you lose the card and need a replacement and if you load it up from your debit card rather than from a bank account.

Interest-only mortgage ‘timebomb’

New figures from Citizens Advice show that almost a million people have an interest-only mortgage with no plan to pay it off. This is higher than previous estimates, and was all the more worrying as some people who contacted Citizens Advice for help weren’t even aware they’d have to pay off the original amount they borrowed at the end of the mortgage term.

With a repayment mortgage, you pay off some of the amount you’ve borrowed as well as the interest, every month. But an interest-only mortgage is ‘as it says on the tin’ and only charges you interest.

These mortgages were popular in the 1980s and 1990s and were sold alongside endowments that were supposed to pay off the loan (and were often sold with the promise of a tax-free cash lump sum on top). In fact, many people found the endowment wouldn’t produce enough to pay off the mortgage.

Citizens Advice says that there are 3.3 million people in the UK with interest-only mortgages, and 1.7 million of these say they don’t have an endowment or other savings plan, and around 934,000 said they didn’t have a plan to repay the money they’d borrowed.

The rules have been tightened up so it’s much harder to get an interest-only mortgage now, but many lenders have also made it harder for existing customers to use existing savings or investment plans to pay off their mortgage.

SAVVY TIP: If you have an interest-only mortgage, it may be possible to convert part of it to a repayment mortgage, but not all lenders offer this option.

Charity fundraising code

After the bad publicity some received in the last few weeks for targeting elderly donors, charities have said they’ll sign up to a new code of practice and will support the creation of a new regulator with tough powers to punish charities that break the rules.

Seventeen charity chief executives, including the head of Oxfam, Cancer Research UK and Save the Children, said that no-one should feel pressured into giving to charity and charities need to act quickly when they get it wrong.

Some charities have been found to be selling on donors’ details, although this isn’t something they all do.

Your bag will cost you!

From October 5th, you’ll have to pay for carrier bags at your supermarket (in England). The charge has been set at a minimum of 5p and applies to single use plastic carrier bags (so not the ‘bag for life’ type) and only applies to supermarkets and retailers employing 250 full time staff or more.

Shoppers in Wales have had to pay for single use bags since October 2011 (and the number of plastic bags being used is down by almost three quarters), while Northern Ireland introduced it in April 2013 and Scotland introduce a 5p levy from October last year.

SAVVY TIP: Unlike the charges elsewhere in the UK, the carrier bag charge in England will only apply to plastic bags (you have to pay for paper and ‘corn starch’ bags elsewhere) and only to larger retailers.