Loyalty is a great quality in a dog, but when it comes to finance you’ll be penalised for staying with the same companies year after year. Here are four times you should treat a financial relationship as a fling rather than til death do you part.
1. Home insurance – Loyalty costs £132
Stay with the same home insurer for more than a year and you’ll be penalised to the tune of several hundred pounds, according to an investigation by Which?.
It found that for contents cover existing customers paid an average £132, or 32%, more a year than new customers, and those with combined buildings and contents insurance paid 38% more if they stayed loyal.
How to cut your home insurance premiums
The longer you stay with the same home insurance provider the worse it gets with the gap between prices for new customers and existing customers widening with every year you stay put.
In one example, a customer who had been with her insurer for six years was paying £219 more than if she joined them as a new customer.
2. Broadband – Prices rise £152 when you are loyal
Research by uSwitch.com has found that broadband customers on ‘standard’ speed packages see their prices soar by an average £152 a year when their initial contract expires.
Broadband customers see a similar jump of £158 a year on average when their deal ends.
Find the cheapest broadband deals
Shopping around doesn’t have to mean leaving your provider, but you must check every year to see if that low-price deal that lured you to that provider in the first place is still in place or whether you’ve been shunted onto a far more expensive deal.
You may be able to simply move to a cheaper deal with the same provider, but there can be no doubt that doing nothing costs you money.
3. Mobile phone – Loyalty penalty £264
Stay with the same mobile provider for more than a year and you’ll pay an average loyalty penalty of £264, according to Citizens Advice.
The cost is so large here because most people sign up to a mobile contract that includes a new handset.
The price of the handset is included in your monthly contract payment, but if you don’t shop around at the end of your deal you’ll continue paying that high monthly payment long after you’ve finished paying for the handset.
How to cancel your mobile phone contract
“Mobile phones are now an essential part of modern life, but the way that the cost of handsets are hidden within some mobile phone contracts gives phone providers a way to exploit their customers,” says Gillian Guy, chief executive of Citizens Advice.
“It is clearly unfair that some phone providers are charging loyal customers for handsets that they have already paid for.”
4. Car insurance - Inertia costs £278 a year
Fail to shop around when your car insurance comes up for renewal and you are throwing away an average £278 a year, according to MoneySuperMarket.
24 ways to cut your car insurance premiums
A third of drivers allow their car insurance to automatically renew without checking it their premium has gone up. On average, autorenewal premiums rise by £50 a year.
Add in the fact that car insurance premiums fell last year and failing to shop around means you are wasting an average £278.
“The FCA took a step in the right direction last year by insisting on greater transparency on insurance renewals, but we clearly need to keep banging the drum when it comes to insurance, as in this case loyalty doesn’t pay,” says Kevin Pratt at price comparison site MoneySuperMarket.
What should you do
Shop around. These are just a few examples of how much you are punished for showing loyalty in the finance world and it adds up to over £800 a year.
Factor in falling interest rates on savings accounts after 12 months, increased credit card charges when your introductory period ends and being shifted onto your energy providers standard rate when your deal ends, and you could be wasting thousands every year, simply by being too idle to shop around.
Take the time to check your deals, use comparison websites to see if you could be doing better elsewhere, then make a note to check again in a year.
If you really can’t be bothered to do it yourself then sign up to one of the new wave of services that will automatically search for the best deals and switch you.
Look After My Bills, which just won the best ever deal on Dragon’s Den, pledges to help people save £253 a year on average by automatically switching them to the cheapest energy deal.