Five Essential Financial Products
One writer picks five specific financial products that are, in his wise and Foolish opinion, the best!
Earlier in the year, I wrote The Ten Best Financial Products and The Worst Ten Financial Products. In these articles, I was looking at types of product, e.g. credit cards or Guaranteed Equity Bonds.In today's article, I'm going to tell you my five favourite products. This time, I don't mean types of product, I mean specific products. Branded products, if you like.As I'm writing about specific products, I feel it's particularly important to say that these are my unbiased views -- which is what you will always get from us writers. The Fool's writers have total independence, so that you get the best possible guidance. And we wouldn't have it any other way.1. Capital One's Platinum Cashback CardFor Fools who are good with their money and have no outstanding card debts, I think you can't beat a good cashback card. At present, the best one by quite a long shot is Capital One's Platinum Cashback Card.You get 1% cashback on every purchase you make, with no limit on the amount you spend. Even better, for the first three months you get 4% cashback! The cashback is paid in January every year.With cashback cards, it's very important that you pay off your balance in full each month, or it'll cost you a lot more than you earn in cashback.Compare cashback credit cards through The Fool.2. The Nationwide CardYes, it's another credit card, but I include this one for completely different reasons. The Nationwide card is incredibly popular amongst the Fool's wise readers, and so it should be.It is unique amongst credit cards in that it has a 'positive payment hierarchy', not a negative one. This is fantastic news for people who like to use their cards for more than one reason (e.g. for both purchases and transfers. (Read about negative payment hierarchy in Best Five Cards For Transfers And Purchases!)Furthermore, the Nationwide credit card (and debit card) is great for shoppers overseas. Like most credit cards, when you use your card for purchases overseas, you get about a better exchange rate than you could expect when exchanging cash or buying travellers' cheques.But what makes Nationwide's cards special for overseas purchases is that you don't have additional charges, whereas most cards will add a charge of 2.75%.Furthermore, when you withdraw money from cash machines overseas, with most cards you're hit with the 2.75% conversion charge, plus a cash withdrawal charge of, say, 3% (minimum £3). With the Nationwide credit card, you're just charged 2% (minimum £2) for cash withdrawals.If you use this card for withdrawals of at least, say, £100-worth of currency, you can expect to get about (or at least) as good a rate as you could if you shopped around for currency in the UK.However, when using the Nationwide credit card (or any other credit card) for cash withdrawals, remember that you get charged an awful lot of interest from day one -- you don't get an interest-free period as you do with purchases. So you must pay off the debt quickly.Finally, when using your card for purchases overseas, if a shop offers to charge you in pounds, say 'No', or you will be hit by higher charges and worse exchange rates!Compare credit cards through The Fool.3. The National Savings and Investments Direct ISAEnough of credit cards, try this cash ISA. Friends frequently ask me to recommend one, and each time I take a look to see which is most suitable, it inevitably is the National Savings and Investments Direct ISA.To me, it's essential that it's an easy access ISA with no nasty penalties. It currently pays tax-free interest of 6.05% and guarantees to stay at 0.55% above the Bank of England Base Rate until April 2008. Of course, if the rate then drops off, you'll need to look again for another ISA so, after then, read any notices they send you in the post which will advise you of rate changes.4. Fidelity Moneybuilder UK Index FundThere are a few very cheap investment products that track the FTSE All-Share. When it comes to comparing the cost of them, there isn't much in it. This discussion thread summarises it nicely: index tracker charges - am i right?As harriseldon1958 says, the Fidelity Moneybuilder might just clinch it, ahead of Legal & General's UK Index-Tracking Trust and M&G's Index Tracker Fund.You can invest in all these funds within an ISA.Read about index trackers in point 3 of The Ten Best Financial Products.5. Icesave savings accountI like this account because you can manage it online, and it's easy access with no catches or penalties. The minimum you need to open it is £250.The interest rate is excellent, at 5.95%, and it's guaranteed to stay at least 0.25% above the Bank of England Base Rate until 1 October 2009. After that, it's guaranteed to at least match the Base Rate till 1 October 2011.To me, this means it's likely that you'll have a top savings account for many years, without needing to switch.The ICICI HiSAVE savings account is similar, as it can be managed online, it has no catches or penalties, and a minimum deposit of just £1. It's rate is even slightly better, at 6.05%.But I feel Icesave edges it for two main reasons. Firstly, although ICICI also has a guarantee to beat the Base Rate by 0.25%, it is shorter: it lasts till 31 December this year.Secondly, when the first account appeared last year, there were a significant number of negative comments about the speed of its service. Thankfully, those comments have dried up completely in recent months, so it may be that it'll be fighting with Icesave on my favourites list in a short time!Compare savings accounts through The Fool.6. Oh, alright! Here's one more...I can't leave without mentioning a decent current account, as it's such a vital product.The Halifax High Interest current account is good for people who stay in credit but never have more than about £2,500 in their account. You must pay in at least £1,000 per month.The first good bit is that it pays 6.17% interest on the first £2,500 of your balance. The second good bit is that if you apply quickly you can get a £100 joining bonus (although you must fill in the forms they send you on time, or you forfeit the bonus).I feel for completeness that I should say if you're too slow for the bonus (or if you can only pay in £500 per month), a better account is Alliance & Leicester's Premier Direct Current Account, which pays 6.5% interest on the first £2,500.Compare current accounts through The Fool.You will notice that all the products in my list are relatively simple. And with good reason! They may be boring, but we find here at The Fool, time and again, that complex products are not good for your wealth. If you keep it simple, you'll do just fine.Note on 5 July 2007: expect changes to some of the interest rates mentioned in this article, as the Bank of England increased rates today.