Why it pays to shop around to get the best financial deals
According to a new report, not shopping around for the best deals can be more taxing than switching. Personal Finance Correspondent Vicky Shaw investigates
You may think you know how much your bank account, insurance or regular bills cost – but could you be paying an “invisible” tax on them?
An estimated 35 million people across the UK could be doing just this, according to Experian.
Around two-thirds of us fail to seek out the best deals when it comes to financial services or utilities products, its findings suggest.
The credit checking company asked 200,000 people whether they had switched providers for financial services or utilities products during the past two years – and found 69.5% had not done so.
Experian likens this lack of shopping around to “an invisible tax on inertia” – meaning people are paying over the odds, but perhaps not realising it.
Some people may see switching as a hassle, or perhaps they don’t think it will save them that much money.
But the cost could add up considerably over a lifetime of not shopping around – particularly if you have several products that haven’t been switched in a while.
For example, the Competition and Markets Authority (CMA) said last year that someone could save £92 a year on average by switching to a deal that better suits their needs.
And watchdog Ofgem has found that comparing and switching supplier or energy tariff can make a big difference to your gas and electricity bills.
It found potential annual savings of around £300 available.
Ofgem has tips on how to become an “energy shopper” on its website at Tiny.cc/betterdeal.
Meanwhile, the seven-day current account switch service, launched in 2013, has made it easier and quicker for people to ditch and switch their bank or building society.
And while March tends to be one of the busiest months of the year for car insurance renewals, UK motorists are collectively wasting an estimated £1.5bn a year by automatically renewing their cover, according to GoCompare. com Car Insurance.
Matt Oliver, a spokesman for the website, says: “At renewal, insurers will offer you cover – without you having to lift a finger.”
But he adds: “Loyalty, when it comes to car insurance, generally doesn’t pay.”
He suggests challenging yourself to beat what you’re being offered, while also considering any changes you may need to make from last year such as cover levels or drivers’ details.
Any spare cash saved from shopping around could be used to kickstart a savings habit and build up a buffer to protect you against any sudden, unexpected expenses.
For those who already have some money put aside, Experian also suggests considering paying down debts with any money sitting in savings accounts as a potential way to strengthen your financial position.
Nick Hill, a money expert at independent body the Money Advice Service (MAS), says he recently switched energy providers – which took around 20 minutes and will potentially save him around £160 this year.
He says: “Shopping around for utilities and financial products is an incredibly important step towards managing money effectively.
“Finding the best deal to free up a little extra cash each month can make a huge difference to people’s quality of life, for a comparatively small amount of effort.
“We’d encourage consumers to be aware of how much they’re paying and to shop around for the best deal.”