Ditch the delay... make the switch
Don’t be scared of shopping around for a better deal
LAST Tuesday the ESRI Behavioural Research Unit published a report on switching financial products, namely mortgages, bank accounts, credit cards and loans.
It reported that 73 per cent of 3,000 adults surveyed didn’t shop around when choosing a bank account, 68 per cent didn’t shop around for loans and 74 per cent didn’t shop around for credit cards.
More startling is the mortgage figure, with 46 per cent of people failing to compare offers which could cost them dearly in the long term of repayments.
Now after a bit of tut tutting about people not being bothered to change, it is important to ask why does this happen?
It is now well flagged that you can and should seek to switch these and other financial products at least annually to get the best deals.
So why the delay in switching? The inertia is due to difficulty comparing offers, uncertainty about costs, time or hassle involved, and the risk of making a mistake.
But there are positive lessons here too. People who compare financial products when buying for the first time are more likely to develop this into an ongoing habit and a higher proportion are likely to switch down the line also.
Ironically those in higher income households are less likely to fear making mistakes, compared to lower income households at 7 per cent to 15 per cent respectively, meaning those who need to switch more are doing so less.
The ESRI report found that a significant minority of 19–28 per cent of consumers did not use online tools, such as price comparison sites, when looking into switching. Those who had compared offers and used online tools when choosing their original product were more likely to end up switching (see my other piece on the CCPC). Also, those who have started the switching process are less likely to back out, the further they progress into it.
An immediate monetary reward in the form of cash back was also a strong motivator for switching mortgages, although the literature suggests that placing too much importance on cashback may lead to skewed and flawed decisionmaking.
To summarise: Use online tools, quantify savings, look at switching all financial services as appropriate and just get started on the process as you will more likely finish it.
Ditch the delay and make the switch.
Got a question for Morgan? Email Morgan@ arrowcoach.ie