Naughty Finance Tricks
You can't trust financial advertising, but here are some tips to avoid mis-selling and to circumvent excessive small print.
Having come from the insurance industry, I know that some insurers have done a good job of making their literature much more clear. I know it's hard to believe but really, some of it is significantly better! However, along with the rest of the financial services industry, they still have a long way to go, particularly with sales copy.The accounting firm Grant Thornton recently examined 117 advertisements from 94 financial services organisations. They found that more than three-quarters of the adverts failed to reach the Financial Services Authority's requirements, which exist to protect us, the consumers.Many companies advertise products at prices that you can't get in practice, says Grant Thornton. Sometimes they compare prices of basic products with competitors' superior ones. They scare people with phrases like: "1 out of 3 people will get cancer in their lifetime", but don't point out that some forms of cancer aren't covered by the product. They also use statistics for cancer cases that are likely to affect people of an age for whom the policy wouldn't be suitable or eligible. They confuse consumers using jargon, such as MVR, LTV, IVA and CCJ.Sometimes these companies use plain English, but still conceal important details. No area of personal finance is left unsullied by excessive small print. Take a look at personal loans, for instance. A lender can advertise the annual percentage rate (APR) of a 'typical' loan, which may include a payment holiday. The holiday makes the APR look lower, when in fact it's higher. To get around this, you should compare the total amount repayable (TAR) instead.You should also consider the nasty way in which most companies treat repayments to your credit cards. Let's say you have a 0% balance transfer card and you make a purchase on it. Even if you pay off the purchase amount immediately, you'll start paying interest. This is because the provider pays off your cheaper debt first, i.e. your balance transfer debt. You won't be able to reduce your interest until you've paid off your balance transfer or switch providers in disgust, whichever comes first.Banking is another example. In this article (down at the bottom) I explained how they massively reduce the credit interest you get, simply if you don't pay any money into your account for a month. For example, one Fool wrote to me today about the small print in an account he held with Abbey. He set up a standing order to pay the minimum amount at the end of the month. However, one day this fell at the weekend, so The Abbey received the payment on the first day of the next month. Because his payment arrived just one day after the calendar month, they reduced the interest paid from 3% to 0.1%.The good news is that this wise Fool complained and was paid the interest he was due, as well as £10 as an apology. It just goes to show that a little attitude can go quite far.Through The Fool, you can compare competitive, quality products, including: credit cards, personal loans, bank accounts and savings accounts.