Seven silly money blunders we all make

Mark Adams reveals the seven biggest money mistakes - and explains how to avoid them.

A staggering one in 10 consumers - some four million debit card holders - are putting their banks accounts at risk of fraud by writing down their PIN numbers, according to a new survey from consumer watchdog Which?. A third of those polled said they kept a record of their PIN in their handbag or wallet, while 9% said they kept a note of it at work.

This careless move won’t just increase your chances of becoming a fraud victim - it also jeopardises your chances of getting a refund if the worst occurs. Writing your PIN down or passing it on could be classed as ‘careless behaviour’ - allowing your bank or credit card provider to reject a compensation claim.

Of course, lovemoney.com users wouldn’t be so careless - yet there are less obvious financial mistakes that we unwittingly commit every day. We uncover six other everyday money blunders - and show you how to avoid them!

1:  Staying loyal to your bank

We all know how to hunt down the cheapest credit cards - yet millions of us still leave our money languishing in underperforming current accounts. Figures from financial analysts Moneyfacts show that more than half of all current accounts (52%) pay no interest whatsoever on balances in the black - so use our current account search to switch to one that does.

The current best buy is the Alliance & Leicester Premier Direct current account, which pays an impressive 5% interest for one year on in-credit balances up to £2,500, as long as you pay in £500 a month. You can also secure a 5% return with the Santander Preferred In-Credit Account - but with this account, you'll need to deposit at least £1,000 a month to qualify. Alternatively, the Lloyds TSB Classic with Vantage pays 4% on balances between £5,000 and £7,000.

2: Keeping your credit card ticking over

So, you’ve set up a direct debit to ensure you make the repayment on your credit card every month - good move? No - all you’re doing is giving more in interest to your provider. Minimum repayment thresholds on credit cards have fallen in recent years to an average of just 2.5% - meaning that by just making the minimum repayment all you’re doing, in effect, is covering your interest charges.   

Here’s how debt can mount up on a £1,000 balance with a card charging 16.9% APR:

• After one year, by making a minimum 2% monthly repayment, you would pay £151.74 in interest and the total balance will fall to £920.60.
• Repay £50 (5%) a month, however, and you’d eat into the outstanding debt by nearly £400, to take the balance down to £524.17.

You can switch to a 0% credit card for new purchases and pay no interest whatsoever. Among the best buys are the Clydesdale and Yorkshire Bank Mastercard which offers 0% on purchases and balance transfers for 16 months and the Virgin Credit Card which offers 0% for 14 months.

3: Paying to access your cash

The big banks have suffered a consumer backlash against overdraft charges - but they do (for the moment) offer us free banking and free access to our cash. Yet the rise in fee-charging machines run by independent operators has coincided with the closure of many local bank branches - particularly in rural areas - leaving consumers stymied.  

Today a scandalous 37% of the UK’s ATM network levies charges typically between £1.50 and £2 for cash withdrawals, with a rare few charging an extortionate £5. The law says fee-charging machines must have prominent stickers warning consumers - but this rule is often flouted with warning notices at knee-height.

The three main companies operating fee-charging machines are Cardpoint, Moneybox and Hanco. Look for these names on ATMs and if you see them go elsewhere or use your debit card.

4: Sharing your personal data with strangers

Obviously no-one who visits lovemoney.com would do anything as daft as keep their PIN written down but sophisticated fraudsters don’t need much personal data to launch an attack. Even if you regularly shred your sensitive mail and check your bank statement every day, you could still be at risk – particularly if you use social networking websites.

Facebook for one strengthened its security controls in December 2009 - yet it still allows people to post their email address and detailed personal information about themselves, from their date of birth to all the schools they went to. That’s precisely the information that banks ask for as security questions - and can easily be used by criminals to commit fraud.    

Don’t be a victim - keep personal info to yourself and update your Facebook security settings to ensure that only people you know can view your posts and profile. It’s also prudent to check your credit report to ensure that no strangers have accessed your account, even if no fraud has been committed - you can see your report now with a free trial from Experian.

5: Falling for store cards

Store cards - typically branded credit cards offered by high street stores - are one of the most expensive ways to borrow. These cards offer exclusive shopping discounts - yet they also come with eye-watering rates of interest. The average interest rate charged, according to consumer watchdog Which?, is 25.2% APR but some charge as much as 30.9% APR.

It’s clear that any savings you make are soon swallowed up by interest charges. Yet 39% of consumers, according to official figures, still use store cards on a regular basis. Don’t do it - find a 0% credit card for purchases instead, such as the Sainsbury’s Mastercard which offers 12 months interest-free on purchases.

6: Keeping dormant direct debits

Are you paying £40 a month for a gym membership you don’t use? Then you’re not alone - recent research from MyVoucherCodes.co.uk has found that the typical Brit wastes £210 a year paying direct debits for memberships and bills they never use.

Don’t be in the wasteful majority - scrutinise your monthly bank statement and purge any payments for services you don’t use. And, don’t forget, you can take even greater control of your finances with our online banking tool.

Don’t forget, you can save even more by adopting one of our goals – such as pay off credit card debts or destroy your debt.