Martin’s Blog…

At the moment the high court case between the banks and the OFT over bank charges is being heard. Sadly, I’ve not managed to make it there yet (though I aim to in the next few days), as delivering the MoneySaving info sometimes takes priority over watching the drama.

However, MSE Wendy has been on behalf of the site; one of her main specialities is working with me on the reclaim articles, so she’s the perfect person to go. She’s written a quick note on what it’s like to actually go there - take it away Wendy….

“My experience of the bank charges hearing

It’s day 7 of the hearing, and as it turns out, one of the last chances to hear a bank speak before the OFT is likely to start its response in the morning. The hearing kicked off at 10.30 and for the next two and a half hours I saw (through a live video link into a feed room next door) some of the most interesting, and at the same time tedious, discussion about HBOS’s current account terms and conditions you could ever imagine, and that’s from someone who has followed bank charges for nearly two years!

The hearing room itself was so jam-packed with files of information and people in suits I’m surprised there was any room to move. It looked to me as though each of the banks had around six representatives each, with a few press at the back and the court staff bringing the total to about 60 people in all. And you’ve never seen so many files; ring binders were stacked floor to ceiling. How the judge will get time to look at it all I can’t imagine, though judging by what I saw today the man appears to have the memory of an elephant, pulling out facts and stats from evidence he’d heard from one or bank or another some time in the last two weeks. I don’t envy the difficult job he has to do.

It’s worth saying that I only heard HBOS (and a short while from Abbey), the sixth and seventh banks to speak, but one point I found interesting was the reference to the “free if in credit pricing model”, not the ‘free pricing model’ as many believe we currently have in this country, by the HBOS lawyer. So even the banks agree that we don’t have free banking in the UK (See my prior blog on this isn’t the end of free banking – ML). However, I’m not sure I agree with his comment that the obvious way for banks to make a profit is through fees on overdrawn accounts.

The main part of the morning’s discussions was based around payment ‘requests’, ‘instructions’ and ‘obligations’, and the differences between each when we’re in credit or overdrawn. These differences make it even more important for customers to be able to understand the terms and conditions of their accounts. Thus, discussion ventured into the very complicated subject of contracts being in a plain intelligible language, which is actually scheduled for in depth discussion on another day. Must try to get back there for that one!”

Comment and discuss

In the Money Diet I write about the fact that “talking about money is the last taboo.” Many will happily reveal their sex lives, embarrassing ailments and more on the TV, but talking about personal and consumer issues still seems to be a no-go zone.

It’s for this reason I wanted the ‘Celeb what’s in your wallet’ section on It Pays To Watch. Having the famous talk about whether they bother saving cash, check out better deals, or even understand their debts, should help normalize it as a topic of conversation for everyone. Hearing MP Lembit Opik talk about his brush with bankruptcy, and Paul Daniels on his “I save 10% of everything, always have” budgeting theory are all a small step towards breaking the money talk taboo.

It’s also worth remembering not all celebrities earn big bucks. It’s commonly assumed that if someone is on TV their home must glint with gold. Yet it doesn’t work like that. Of course, the bigger your name the more you earn, yet I know a good few folks I know who appear on the box and earn under £20,000 a year, and a tranche at under £30,000. Whilst this is far from a poverty wage, it certainly doesn’t buy the glamourous lifestyle people assume celebs lead (I can’t count the number of times I’ve witnessed people going up to them saying “you’re on the telly, you’re loaded, buy us all a drink” when they’re out for the night – when I know they’ve got the same problems as everyone else).

Of course, once you get in the ‘celeb’ category, it’s likely you’re earning more, yet again the salaries aren’t necessarily that high. And even if they are, the fact celebs may instinctively react with a “pah, £500 saved, what difference does it make?” is instructive in itself. As frankly, anyone blasé with wasting money will probably never be super-rich. Would Alan Sugar say that?

This week it’s athlete Iwan Thomas, the UK 400m record holder. Athletics is a relatively underfunded sport, so it’ll be interesting to see his attitude compared to, for example, his superfunded footballing colleagues.

Comment and Discuss

In last week’s email and on It Pays To Watch I mentioned a Boots loophole allowing many to get a £10 face powder for around a quid. Yesterday I walked into Boots, and as I walked past the counter I heard my name muttered in disparaging tones; I didn’t quite hear the “it’s his fault”, but I know many thousands have been going in to take advantage of the loophole, so I think I may avoid dropping in for a while.

Not only that, but I’ve also heard feedback about the four free Budweisers in the email the week before. Both MSE Darren and MSE Dan popped down to take advantage, only to have the woman behind the bar tell them “some bloody money website put it in their email and we’ve been swamped, there were queues of people with the vouchers outside all the London branches and now they’re sold out.”

Think I may avoid that too!

Comment and Discuss

I was rather taken aback today to receive two large his and her’s parcels; with a note from the press office at Lloyds TSB on them. As many will know we’re in the midst of the bank charges campaign; and the I fought the Lloyds song in which I proudly feature is a recent chart hit. Of course the song isn’t deliberately targeting Lloyds, it’s about all banks, it just happened to be the bank which the song’s author was with; yet in the current climate to be sent a gift was a bit of a shock.

When I opened it, I realised it was to congratulate the MSF and I on our engagement. Two bright pink personalized beach towels (with a special elasticated bit so they can go round a sun lounger) one with ‘Money Saving Groom’ and the other ‘Money Saving Bride’ on it. It seems a little romance goes a long way even in the banking world.

Thanks to all at the Lloyds press office

Comment and Discuss

Finally, the flick-flack nature of the media means that having initially helped champion bank charges reclaiming some are now trying to hastily put together pieces saying… a win for the OFT in the test case won’t be good for customers, as it’ll mean the end of ‘free banking’. It was always bound to happen.

Yet actually much of the argument is built on bluff and bluster rather than hard facts. Let me set out my off-the-cuff response.

• Free banking doesn’t exist so how can it end?

We do not have free banking in the UK, we have ‘fees-free banking if you’re in credit’. Ask anyone who is overdrawn if their account is free. Even if you’re in credit there are a myriad of other charges that banks levy, and with most giving a paltry 0.1% in-credit interest but charging 14%-18% for you to borrow it back, ‘free’ is a true misnomer.

• If they could charge fees they would’ve done already.

A bank’s job is to make money, and they’re very good at it. Win or lose, be assured many dedicated bank brains will be working on new ways to generate profits from consumers. That’s what they do, and very successfully.

It always makes me laugh that articles often refer back to the April 06 OFT opinion that effectively reduced credit card charges and say “lots of new credit card charges have been introduced because of the OFT case”.

This makes no sense. New credit card charges were launched because the bank found another way to bamboozle customers into giving it more money. Do you really think once they thought of this, they wouldn’t have introduced the charges anyway?

When it comes to the banking sector as a whole, remember it makes £40bn a year; and I’m sure it wants it to be £50bn – whether or not it has to pay back bank charges reclaims.

Yet the reason they haven’t is simple…

• The current account market is ferociously competitive.

Banks are desperate to win customers, hence right now you can get a 0% overdraft for a year from A&L, or 8% in-credit interest from Abbey or £100 for setting up a new First Direct account (See best bank accounts for details). The current account is the building block of finance; it’s more than a mere product, as the data gathered is used to cross-sell us many other products. Any bank who introduces a fee will haemorrhage customers, and others will lap up the commercial opportunities and suck in their customers with fees-free accounts.

Remember it’s estimated a billion pounds has already been paid out.

• Blame the credit crunch more than bank charges.

Frankly for the banks, while the bank charges campaign is a PR disaster, the credit crunch is a much more pressing and costly problem. The money the government has pumped into Northern Rock (£24bn) easily dwarfs every bank charge from every bank over the last six years. While the bank’s spin suggests they’re “miserable due to nasty reclaimers”, frankly their issues are far more inflicted by US sub-prime borrowers than UK reclaimers.

• If you’ve never had a charge, no change is even more likely.

The well-managed account holders who the spin says “will lose out” are actually, if anyone were to lose out, the least likely to. That’s because they’re the ones the banks want the most.

Yet this isn’t just about the money…

Yet even if fees-free in-credit banking were to end, not that I think it will, then that still wouldn’t mean the bank charges campaign is wrong, for the following reasons:

• They’ve been legally unfair

Assuming the OFT win in court, that’s because banks have been levying unlawful charges on millions of people for years. Why should they get away with this to the detriment of millions?

• There’s rate competition, but no charges competition.

Another oft-quoted myth about bank charges is “if you don’t like them why don’t you switch bank.” Yet there really is virtually no competition in the bank charges sector and never has been, so where do you go?

• No single issue has better educated consumers.

A bank’s job is to make money, simple as that. It’s there to flog you things. Yet for years too many people have believed their bank’s their friend. The bank charges campaign has opened the door to a new well-placed scepticism; it means that people finally realise the bank isn’t on their side and isn’t always right; it can be beaten, and we should be cheering such a great move forward.

The bank charges campaign opened the door for the PPI misselling and Mortgage Exit Fee reclaiming.

• People often have no choice about how they pay

Over the last few years more and more companies have pushed, discounted and cajoled us into paying by Direct Debit. If you don’t you pay more; or in some cases can’t even get a deal. When you factor that it in to the ‘manage your money argument’. It gets very difficult; with automated payouts if you dont have the money, it disappears anyway. Direct Debit bouncing is a big trigger for many bank charges.

• Banks invented bank charges to make money, they’re not being ‘stolen from’.

A line commonly used against the campaign is “these people who go beyond their overdraft are stealing money from the banks; they should be punished.” Again, this is simply believing bank spin; bank charges were introduced to aid profitability.

In days of yore, if you attempted to pay a Direct Debit or cheque with insufficient money in your account it simply wasn’t paid out. Then it changed, probably because some bright banking spark decided that more money could be made if they did pay out. Now, the real system is hidden, but it works like this:

How overdrafts really work:

Authorised overdraft limit: £1,000
Unaurthorised hidden ‘paid limit: £2,000
Unpaid beyond that

You have to admire the profiteering genius of this system. Instead of not paying, the banks created a system where they would pay out, but would charge £35 a pop for every transaction - no matter how small - beyond that limit. It’s no wonder they now make from £1.6bn to £3bn a year from this. In the past once you couldn’t pay out you’d know as the payment wouldn’t go through. Yet this new system meant many many more penalty charges could be levied as people paid for things on cards in stores, and all went through fine without realising there’d be a £35 charge every time.

If banks didn’t want people to take the cash, they simply wouldn’t pay it out.

Frankly I could go on… (as you probably realise) there are many reasons to support this. However there is one more important note to make.

Bank charges should be an indication that we need to manage our money better

While I believe bank charges are unlawful and my hope is the OFT test case will prove it so, the best way to deal with them is still to avoid them. We must learn to be defensive consumers; of course, once you’re in the snowball trap of a set of charges breaking out is impossible (see the Bank Charges article for an explanation), yet there are people who’ve had bank charges, reclaimed them and had more, and this does mean some may not be learning from the experience.

It’s the reason I didnt particularly support the claim for ‘exemplary damages’ that one bank charge reclaimer tried. This isn’t about putting those who’ve had bank charges in a better position than those who haven’t. It’s about making the charges proportionate under UK law - which they’re not.

We have our role to play too. Learning decent money managment (see the Budgeting guide is our greatest weapon against bank fees. And while we should champion fighting the bank’s unlawful actions we must also take on our own behaviour to ensure we don’t give them the opportunity to snatch our cash. Sadly we’re a financially illiterate nation and that has to change too (for a basic start point read the guide)

Comment and Discuss

A&L has a Car Insurance promotion out which says “One year’s cover FREE if we can’t beat your existing renewal quote”. Doesn’t that sound great?

Yet dig a little deeper and you’ll find it’s just a silly bit of irrelevant marketing spiel. If you apply for a quote online, you enter your renewal details and, it seems to me, most of the time one of two things happen, either…

1. It almost always seems to quote around £10 less than whatever you entered as your renewal quote.

2. It doesn’t quote at all.

Thus the 1 year free policy seems to be a red herring, and A&L is rather cleverly only just beating renewal quotes for most companies. Now when you consider that car insurance companies rely on apathy and usually push their renewal prices far higher than new customers would get elsewhere (or even with them if you get a quote as a new customer) this really is pants.

Ignore it, you’re far better off using the techniques in my Car Insurance cost cutting article; A&L are typically beating renewals by just £10 – other companies guarantee to beat them by more.

Comment and Discuss.

This month I’ve started a new weekly column in the News of the World (though due to my work commitments from Feb I’m dropping it to fortnightly). Having previously been a columnist for the Sunday Times, Sunday Express and Guardian, it’s quite a departure and it took a lot of thinking about.

Interestingly, the precision needed for the column is upped; to make it palatable and in tune with the house style it has to be punchy, upbeat and interesting – quite a challenge for some more technical subjects. In the Sunday Times money section I could assume some pre-knowledge, but not in the News of The World.

The reason I choose to do it is simple; it has the most enormous reach, far beyond any other newspaper. For me that’s crucial; part of my MoneySaving passion is all about reaching as many people as possible. I must admit when I saw my first column which was about PPI reclaiming I felt a real burst of joy.

PPI reclaiming is such an important issue, the systemic misselling is huge, yet because ‘not knowing you have a policy’ is a category of misselling, it’s a tough campaign. Telling people they can get money back on something they don’t know they’ve got isn’t easy. So getting to this audience is really important.

Even better, rather than being in a ‘money section’ where only those already interested tend to read it, I get a page within the reviews section alongside films, agony and more. Which means its a happened upon issue in all likliehood reaching many people who will never have heard of it before.

To bring this type of subject to such a big audience, and perhaps one who are most likely to have suffered from it is very politically empowering. It’s an incredible opportunity.

Comment and Discuss.

Recently I upgraded my phone (don’t worry - it was a free upgrade, see the cheaper mobile tariffs article) to the wonderful HTC 3100; a Windows CE model with a pull out keyboard, and importantly, its own GPS receiver.

Now, having had two Sat-navs stolen - the first by people breaking into my car, and the second by the MSF who found it so useful (and drives more than me) that it gradually moved there permanently, I decided I would try it on the phone.

In the end I opted to download the Tom Tom software onto it for about £80; cheap for Sat Nav. And I have to say it’s fantastic; having it with me all the time is a great enabler for the following reasons:

So, if you need a Sat-nav and have a free phone upgrade coming along, I have to suggest you get one with an inbuilt GPS receiver. It’s a very convenient and relatively cheap way to do it.

Comment and Discuss.

The Inland Revenue is planning to allow people to pay by credit card as well as debit card.

The Good news

When I first read this, as a system player, my initial personal instincts were ‘fantastic’. For those of us who are self-employed the tax bill is the biggest lump sum payment of the year. Thus, to bring this into the MoneySaving fold enables you to do two things:

• Stooze. If you can pay for all your tax on a 0% card, this is a great way to stooze (make free cash from credit cards). As rather than utilizing balance transfer cards, which have a fee, you can use the top 0% for purchases cards which don’t. While using cards that you spend on to stooze has a lower fee, normally it takes time to build the spending up on the card; yet with a tax payment it could be done instantly (read the Stoozing article which will explain all this, if you don’t understand it).
• Make serious cashback. Currently the two best cashback cards on the market pay four or five percent cashback in the first few months that you have them. So, if you time the application to just before you need to make your tax payment this could be a real bonanza. Ie. If your tax bill is £10,000 you could get £400 back!

There are two things that may hamper this when we see further details. Firstly, it’s likely that people who pay by credit card will have to pay the ‘merchant fee’; the extra amount the revenue must pay for processing it by card. This will probably be around 1% of the sum – yet while this diminishes the gain, it won’t hurt it too much.

The other one is more damaging; it is possible credit card companies could count this is a ‘cash withdrawal’ in which case it’s a nightmare as it won’t be at zero percent and even if you pay the card off in full you’d pay interest on it. We need to watch out for that one, as it’d be a scandalous disgrace if it happened.

The Bad News

The worry of course is this encourages people not to put money aside to pay for tax, knowing that they can put it on a credit card. Yet for me, this is tempered by the fact that currently people who do this use a loan, and the best credit cards are cheaper than the best loans, so if someone is in this position - and does their research - it can be cheaper. Having said that, we need to ensure we don’t encourage borrowing to pay for tax.

My view is simple – for every £100 you earn roughly £33 of it isn’t your money, it belongs to the revenue to pay tax and National Insurance (and it’s more if you’re a higher-rate taxpayer). So as soon as you earn this, put it away in a top savings account specifically for tax (or if you’re using the free budget planner you’ll see a special category for it there). Then you never see this money (though it does earn you interest) and you don’t feel it’s yours – which of course in the long run, it isn’t.

Comment and Discuss

In the cheapest petrol article, as well as how to find and pay for petrol the cheapest way, there are top tips for driving more efficiently to cut petrol usage. I recently had the opportunity to test it for myself for the first time. On Christmas holiday in South Africa (and before you ask, yes it was a cheap flight, we hired a car (and yes it was from the cheapest car hire!) which had a digital display of fuel efficiency. Now as anything with changing numbers on it appeals to me; I decided to use the trip as an experiment (and yes I’m a nerd).

Before I explain the experiment it’s important you understand my normal driving style. I’m not a boy racer; I don’t accelerate away from traffic lights and brake hard at the next one (the most inefficient and expensive way to drive). Fuel efficiency is something I generally take notice of, though as I drive a little Smart car it’s pretty good anyway.

The parameters of the experiment

Thus as I already drive pretty efficiently, the aim here was to find out if by being ultra-conscious of every time I put my foot on the accelerator, I could increase my driving efficiency. So on every journey we made, I reset the ‘trip average’ button and measured the fuel efficiency of the journey.

On one leg I would drive normally, on the other I would drive with a real focus on use of gas, remembering every time I put my foot down it used fuel. To ensure the accuracy of the experiment I varied whether it was the outbound or return journey to ensure that any height differences between destinations would be even out. The trips were a mix of urban and extra urban areas.

The results were phenomenal

On every trip there was a substantial difference between the number of Km per litre I got using my different driving heads. After totting it up; the average was as follows:

This is a saving of £440 a year!

This mightn’t look a big difference until you look in terms of percentages. This is a 20% increase in efficiency. For someone who currently spends £50 a week on fuel the cost would reduce to £41.50 a saving of £440 a year! And remember, this is for a normal driver; those who like to razz their cars would spend more.

The impact on my speed

What surprised me most was that it had very little impact on the time taken to get there. The two main ways of doing this are when coming to a junction; rather than just braking I let the car slow down more naturally, but it didn’t mean I lost track of the car in front. Also, when accelerating I did so more slowly, keeping the revs down, yet overall getting to the same speed, just using much less power.

The one major difference was I had to be much more aware of the fact I’m driving, rather than putting the mental auto-pilot on as most of us do. Though again, actually for safety’s sake this was good, as I was much more aware of the road and cars around me than normal.

I would be fascinated to hear if anyone else has tried this; or maybe will now after reading it.

Comment and Discuss

We film It Pays To Watch two hours before transmission as live (it’s done early for legal reasons). So I got to go home and watch the show with everyone else. I always hate watching myself; but it’s important to do it for next time.

My overall summary was – good first programme, a wee bit of polish needed, and I need to slow down sometimes. I thought the comper story was great; as was thrifty tips. I was very pleased we got the MEAF successes; in the dress rehersal (different people) one person was on hold so long we almost missed it; but this time all three got in.

Overall it’s exhausting. I actually prefer doing the It Pays To Watch More programme that we show on the web; as the need to ‘hit the time’ is much less. I’m writing this ten minutes after the programme so I’m a bit punch drunk with exhaustion. And will stop there…

Comment and Discuss

PS: Just spoke to my grandma. She thought the programme “was wonderful darling, but my heart almost stopped when you were climbing up that wall; why on earth did you do that; its so dangerous.”

I’m feeling a wee bit overexposed this week, what with being on the front of the News of the World about my new column there; having a GM-TV trail of me running and of course a trail for It Pays To Watch which starts this Wed on five at 7.30pm (so much work, there’s hardly time to breathe).

The five trail sounds funny though, I haven’t actually seen it yet. I’m standing there looking like I’m waiting and they say something like “Martin Lewis can save you thousands, but we’re keeping him quiet until Wednesday…”

The funny thing about this is I never recorded that trail; I was just asked to record some rather straight ones, ie “Starting next Wednesday, save a fortune with It Pays to Watch.” The only thing I can guess is that the camera was running during the trails (as you record a number of different ones for when it’s shown e.g. starting Jan, starting next week, starting Wednesday, starting this evening, starting tomorrow) and during that there were periods in which I was waiting to be told which to do next.

I suspect they’ve used that footing; so if anyone thinks it’s good acting, it’s not, it’s the real thing, me feeling time-pressured and wanting to get on with it.

Comment and discuss

Boy you can tell the AA is no longer a mutual but instead part of a big corporate company. Its latest act is an absolute disgrace! Take a look at this:

On 13 Dec it said it’s putting its rate up even though base rates had dropped

On 13 December 2007 the AA increased its savings rate making it the best buy, a shock as the Bank of England had just cut UK interest rates. Its press release said (I’ve highlighted the important bit):

“The account has been launched to maintain the AA’s best-buy position even though the Bank of England has announced a 0.25 reduction in the base rate. It replaces the Telephone Access Account which offered 6.30 per cent gross/AER, but without a bonus. The new account reverts to 6.30 per cent on expiry of the bonus.”

Says Mark Huggins, managing director of AA Financial Services: “This account is similar to the account it replaces, but with the important addition of the 0.20 per cent ‘icing on the cake’. It provides a top interest-paying option for those who prefer to use the telephone to manage their financial affairs, rather than the internet. Plus, it’s a secure, well-managed account from one of Britain’s most trusted brands.”

On 3 January it cut them again

Then on 3 January 2008 it dropped its rate by 0.25% to 6.25%, making it even lower than its original position. And remember there has been no base rate announcement in the meantime, yet it has cut it by that base rate amount.

Hang your head in shame AA for such terrible spin and misleading info.

Comment and Discuss

I put out a press release on last night’s npower energy price rise today (see Cheapest Gas & Electricity article for details, the energy switching traffic light is now on red). Yet it caused me a problem: at one point ‘npower’ was at the start of a sentence, yet its brand name means the first letter isn’t capitalized. If it’s at the start of a sentence do you still begin with a capital letter?

What about eBay and iTunes as well – as there the second letter is capitalized.

Anyone want to eat, shoot, and leave me the answer?

Comment and Discuss

In my last blog I told you I’d got engaged. Frankly we’re overwhelmed by all the notes of congratulation and it’s absolutely wonderful of you all. In the Forums there seems to be a separate thread, each with scores of notes in on many of the boards, and many hundreds overall; so much so it’s tough to keep up! So the MSF and I both wanted to send you huge thanks; it means a lot. If our lives together are as tenth as happy as you all wish it to be; it’ll be wonderful.

And now to answer the various questions about the Scrabble…

Q. How did I fix the scrabble letters?

A. Simple, in the hotel room before we went, I snuck the 15 letters needed from the travel Scrabble set into my pocket; and palmed them out while she wasn’t looking.

Q. Why 15 letters not fourteen?

A. Because I needed an A to guarantee I went first – that was placed in a separate pocket

Q. How many points did I get?

A. As I put it across two lines, I didn’t really get any.

Q. Did the MSG/MSF notice?

A. Half way through she said “hold on don’t you have too many letters”, at which point I asked her to ssssh in such a way she seemed to realize. Then I when I showed her the board and got down on one knee…. she got the hint.

Q. Who won?

A. We didn’t finish that particular game, but overall on the holiday I won 6 games to 2; more importantly I won her hand.

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