Martin Lewis answers your money questions

The cash-saving guru from moneysavingexpert.com tells us why he thinks what he does matters, and answers your questions He’s our favourite financial anorak (well, not everyone’s, but we’ll come to that later), Britain’s evangelist of thrift. His message: they’re out to screw you – don’t let them. Every year, he helps millions save millions on everything from credit cards to mobile phone contracts; thanks in no small part to his campaigning, Britain’s banks have paid out more than £1bn in unfairly levied overdraft charges (and set aside another £6bn for mis-sold payment protection insurance). Now Martin Lewis, founder of the phenomenally popular website moneysavingexpert.com , is here to answer your questions. First, though, a couple of mine. Last week it was announced that Lewis was to head up a new task force to “combat the myths and misunderstandings” around university tuition fees. Could this be the first step towards the people’s champion – the crusading campaigner whose battle-cry has always been “consumer revenge” – selling out, getting co-opted? In the bar of the west London office complex he shares, he shoots me a withering look. Dapper, fast-talking, alarmingly numerate, at times genuinely impassioned (he really does seem outraged at the idea of anyone paying a penny more than they have to, for anything), he explains that no, this isn’t a government body (it doesn’t even have the government’s formal blessing); he’s not being paid a penny to do it; and of course it fits in with everything he’s about. “Look, I don’t support the changes in tuition fees, and I wouldn’t have introduced them,” he says. “But if we’re going to have them, then people have to understand them. For 20 years now we’ve educated students into debt when they go to university, but we’ve never educated them about debt. Now tuition fees are about to treble; it’s essential students understand what they’re getting into, and what they’re not – that somebody explains the system. The crossfire of political spittle has caused massive confusion.” It’s “incredible”, Lewis says, that in the wake of a major financial crisis triggered by massive corporate and public debt, “we still don’t have financial education in schools: we still don’t teach financial literacy”. He was recently involved in the formation of a huge all-party parliamentary group, more than 200 MPs now, calling for precisely that: “I’ve spent my career trying to navigate people through systems I don’t believe in. How is this different?” But if Lewis hasn’t yet joined the establishment, he does admit to wanting a change of roles. Asked where moneysavingexpert goes from here – the site is now visited by an astonishing eight million of us every month, and another six million receive Lewis’s monthly email – he says it is “in a very good place. It does an incredible job and I’m amazingly proud of it. But personally, I have about five full-time jobs. It’s quite tough. Certainly 10 years from now, I’d like not to be in day-to-day control of the site. I’d like to be in policy, on financial education and mental health and debt, the two issues that really drive me. Not in parliament, no. But in policy.” Because it’s a bit wearing, being the nation’s financial family doctor. “At lunch today, I did seven photos and had to answer six questions,” Lewis says. “I recently had 10 people queuing up to speak to me when I was buying a burger in McDonald’s; I had to say to them, I just can’t do this. No more. On the tube once, a woman threatened to kill herself if I didn’t sort out her financial problems. Our primary task is to help people, and I genuinely believe – though I’m not a social entrepreneur, we’re not non-profit – that we have a real public service remit. But it would be nice just to have a clear desk from time to time. To think. To do things on a less day-to-day level.” But enough of the general; on to the specific. Here is a selection of the questions G2 readers sent in. I’ve grouped some by topic, and edited all for reasons of space. Some readers asked not to be named, so I’ve used initials. Can I reclaim past overdraft charges? After the 2009 court decision in favour of banks on overdraft charges, is there any chance or way of getting some compensation for past overdraft charges in the future? And if so, how? Christine Young ML: The day the supreme court ruled, on a technicality, not that overdraft charges were fair but that they didn’t have to be fair was one of the worst in my career. Some say, why should people get overdraft charges back – effectively, this was just stealing from the banks? I’d make two points: first, I believe these charges are unfair under the law. If I tell you I’m going to punch you, then I punch you, it doesn’t make it legal; the fact that bank charges are in the terms and conditions doesn’t make them legal. Second, in the old days, if you overdrew, the bank simply wouldn’t let you have the money. Then they let you have the money, but charged you 35% for the pleasure. That earned them £3.6bn a year – so who’s stealing from whom? But where are we now? Bank charges have come down, which is good. We have a guide to reclaiming and we still do get successes. But I think we have to recognise that most of them are now people who have been put in real difficulties: hardship cases. Are charging orders on homes fair? Increasingly, credit card companies and banks are taking out charging orders on homes to recover their original loans. When these banks and credit card companies sold these loans they were unsecured. Do you think it fair that creditors can use this route to make an unsecured loan secured? Richard Hardistry ML: I’m no supporter of charging orders. To be fair, it’s very rare for them to press you to actually sell your home. But yes, certainly, we have real issues in this country with credit regulation, and I agree: if lending is unsecured, it should be unsecured. It subverts the whole system to behave otherwise. The general point is, when a loan is secured, it means the lender gets security, not you – if there are problems, they can repossess your home. All things being equal, it’s better to take unsecured. How about a campaign for car park ticket machines to give change? Car-park ticket machines unapologetically give no change, despite the technology working fine in other sectors. Can NCP and the like be convinced to either use this revenue to install change-giving machines, or donate this unfairly gained profit to charity, or stored as credit for the next ticket buyer? Jim Medway ML: It’s not really big enough to become a new campaign, but I have a lot of sympathy with this. Companies should not need to be told that this kind of tactic really pisses people off. We have a thing called the 50 words Moneyfesto in which we ask people to suggest to the government the small changes that would make a difference, and I think this would absolutely be right for that. And there’s no doubt parking is a major issue. The fact that private companies can kidnap your car by clamping it, and dress an invoice up as a fine, and that we have no independent appeal mechanism – we urgently need a formal review of the whole sector. How much should I pay into my pension? I am in my mid-30s, earning in the mid-30Ks. I have a company pension that pays 6% into the scheme. How much would I need to supplement this pension by in order to ensure an adequate standard of living upon retirement? DC ML: Hmmm. As much as you possibly can, as soon as you possibly can. There’s an old rule: take your age when you start contributing, halve it, and that’s the percentage of your salary you should be putting in. And if your company offers a matching scheme, pay as much as you can into it or you’re just throwing your salary away. Will we ever be able to trust our banks again? At 62, I can easily remember when it seemed reasonable to trust my bank and building society do their best for me as a customer. Around 10 years ago, the right of customers to expect fair, or even efficient, service seems to have been totally dismissed. Do you see this ever changing? Or is the concept of “trust” outmoded? Ellen Kelly ML: No, I don’t see it changing. People need to understand now that a bank is a sales institution, not an advice institution. Banks are product sellers. It follows that there is no best or worst bank, just best and worst products. Santander may offer the best savings product, Barclays the best credit card. We have to forget loyalty: buying everything from one bank is like saying, I only buy records from Polydor. Assuming Polydor still make records. How can I reduce my car insurance premium? I’m 25, have been driving for a few years and have built up a four-years no claims bonus. I’ve never had an accident that was my fault, and consider myself a safe, careful driver. This year I am cutting my mileage to 3,000, and will not be commuting. I drive a one-litre Nissan Micra, stored in the garage of a quiet location overnight, and I am the only driver. Yet my quoted premiums are £200 more than last year, and this is third party, fire and theft. Is there anything I can do? David Smith ML: Average car insurance has gone up by 40%. Some tips: it’s interesting David quotes third party, fire and theft because, counter-logically, it’s not always the cheapest. Because insurance is all about assumed risk, selecting comprehensive may put you in a lower risk – therefore cheaper – category. Also, never auto-renew; use more than one comparison site, and don’t forget to add in Aviva and Direct Line, who aren’t included; check you’ve got the most suitable policy; and when you’ve found the cheapest, go to a cashback site and see if you can’t get some cashback. How can I invest better? I am a teacher in my 30s with a mortgage and an ability to save. I have £15,000 in an ISA and am chucking a grand a month into a savings account. Everything is with HSBC as it’s easier that way. Should I be investing better, and what goals can I set myself? Claire Finkel ML: I don’t do investment advice. Risk prediction, crystal balls, all that – there are far better people out there than me for that. That said, if Claire was here now I’d be slapping her wrist. How can you ask what to do, then tell me you’ve got everything with the bank because it’s easiest? You’re almost certainly getting crap rates on your savings. If you have a mortgage, and there are no penalties for overpaying, the most effective, risk-free use of most people’s cash is to overpay on their mortgage. You need to keep an emergency fund available, but if your mortgage is at 5%, paying it off is equivalent to earning 6.2% in a savings account for a basic rate taxpayer, and 8% for a higher rate taxpayer. How can I improve my credit rating? What advice would you give to someone whose credit rating is at rock bottom after a sustained period of unemployment which led to mortgage, insurance and utilities arrears? If you are not able to switch providers, how do you save money and/or get yourself out of a financial hole? Angela McNulty ML: Most debt problems are not to do with overspending, but with a sudden and unexpected change in circumstances. It can be very difficult when you had money and then no longer do, because you’re locked into certain spending patterns. But not every provider requires you to have a good credit rating, and there are many other things you can save money on. If you are still in debt, see one of the non-profit debt counselling services. If you’re not in debt and are employed, there are things you can do to improve your credit rating: get a high interest-rate credit card, don’t spend much, and pay it off in full at the end of every month. Credit scores are about predicting future behaviour, and paying off a small amount in full every month will gradually raise your rating. And there are other deals: pre-pay energy and mobile phones, for example. The bottom line is, make sure you’re paying the least possible, and then cut back if it’s still not enough. How much do you make on referrals? How much money goes directly to you every time someone clicks on a link on your site? Why does your email now virtually never highlight items you don’t get a referral commission for? It used to be impartial and independent. You can usually get a better deal by going to quidco.com or other referral commission kickback sites – but you’re not telling people that. Abbie Case, Kenton Price and assorted others ML: Look, I have 35 staff. I have server costs and legal costs in the hundreds of thousands. There has to be a balance. We will always tell you what the best deals are, whether we get referral commission or not. We will never compromise on that. But we will sometimes mention some products a little more often than we otherwise would. That’s the only commercial weapon in my armoury. And when we do that, we tell you so: when a product has a star beside it, it’s a referral. The only reason people can spot that is because we tell them! I’m trying to spot the best deals, I’m trying to be clean and transparent. But this kind of criticism annoys me because it’s fundamentally not true. Look at this week’s email. The main article is on student fees: no referral link. The top product lead is the Newcastle Building Society’s 4.2% one-year fixed savings loophole, an unbelievable best buy: no referral link. And on the cashback sites, it’s just nonsense: if you ask quidco or topcashback and the others who generates most of their traffic, they’ll tell you we’re one of the biggest. Polls show fewer than a quarter of people are interested in cashback, and my view is that it’s best to go for the best product, not the best cashback deal. But we have a cashback site checker on our website. It’s just not true that we don’t tell people about them. Family finances Personal loans Personal pensions Borrowing & debt Pensions Consumer affairs Jon Henley guardian.co.uk

Posted by on June 21, 2011. Filed under News, Politics, World News. You can follow any responses to this entry through the RSS 2.0. You can skip to the end and leave a response. Pinging is currently not allowed.