There are lots of different current accounts available these days and some providers even charge for current accounts. If you are considering changing accounts or are just curious about what is available you may wonder why anyone would pay for a current account. There are advantages though, but you need to make sure that they will work well for you. There are certain things that you might get that could make it worthwhile paying the monthly fee.
Most current accounts no longer pay any interest, but if you pay for an account you may be offered interest on the money in the account and it could be quite a significant amount relative to what you can get in instant access savings accounts. You will need to work out how much you will get though to see if it is worth it. You may find that you can only get it if you have over a certain amount of money in the account or pay more than a certain amount in each month. You may found that the interest is only paid on the first certain amount of money you have. It sounds complex and that is because it can differ so you will need to check carefully to see what restrictions there are on the interest that is paid.
Some paid current accounts will offer free insurance as part of the package. This can suit certain people but it will depend on whether it is insurance that you would normally take out anyway. If it is additional insurance that perhaps you do not really think that you will need, then it is worth considering whether it is actually worthwhile bothering with it. You may be getting a freebie which does not actually benefit you at all. So if it is travel insurance which you do not normally bother taking out, then consider whether you really want it.
Other Discounts or Freebies
There may be other benefits as well, such as discounts on overdrafts or free things. The offers will vary between different accounts. It is really important to make sure that you are not tempted by the offer even though it is not really something that benefits you. Often freebies and offers can be made to look really attractive but we need to think about whether they really are of benefit to us. Add up the value as well of what you get form the account and work out whether you are getting good value for money for the money that you are being charged for it. If you are likely to use the overdraft look at the rate for that as well and see how it compares to other current accounts as you do not want to pay more than necessary for that either.
So, these accounts could be worthwhile but it very much depends. They will vary in cost and the benefits that you get will also vary. You will need to take a look and see whether you feel that they will be good for you. You will need to think about whether you think that they will offer you value for money. If the freebies, offers and interest are really good and are things that you would otherwise have bought then this can be great but you will need to check their cost, if you do have to buy them and how that compares to how much you are paying for the account. If you are getting something worth more money then it is worth taking one out but otherwise it will not be.
There is sometimes an opportunity to get a 0% credit card. This means that it will be interest free. It can seem like a really great idea to be able to borrow money for free. However, it is well worth making sure that you are fully aware of how it all works and then think about whether it really is the right option for you.
How Does the Card Work?
These credit cards work in a very similar way to any other credit card. They will allow the holder to use them like they would any other credit card. So, they will be able to buy items using the card and not pay for them. When the statement arrives, the card holder will still have to make a minimum payment but they will not be charged any interest on the outstanding balance. It all sounds great, but the 0% period will not last forever. You will only get it for a certain amount of time, perhaps only 6 months but this will vary depending on the card issuer. This means that once that time is up you will need to start paying the interest on it unless you can repay the balance before the interest starts being charged.
How to Take Advantage of it
It can be good to use the card during the interest free period and perhaps even spend it up to the credit limit. You can use it for a large purchase that you need to make or to buy your general shopping with. Then you can put the money that you would otherwise have spent on the items you were buying into a savings account and earn interest on it. Then you can use the money to repay the card once the 0% interest period ends. You will then gain the interest on the money. Of course, you will need to be very self-disciplined with this and make sure that you do put the money into the savings account and do not spend it or else you will be in trouble when it comes to having to repay it and you will have to pay interest on what you owe and this could be very high. Therefore, you need to make sure that you only do this if you know that you will be able to manage the repayments.
What to be Aware of
It could be the case that you will spend more money than normal because you have this interest free card. You might think that you can use it like free money and buy all sorts of things on it and not worry about it. While it is free for a while, it is well worth remembering that you will need to repay it at some point. You hopefully want to repay it before you get charged any interest on it too. It is likely that the interest free period will go very fast and you will You will probably find that the interest on this sort of card will be higher, once you are charged interest than the interest on a regular credit card, so you need to be really careful of this. If you spend a lot on it and take a long time to repay it, it could even end up costing you more than if you had used a regular card. So be really careful about getting one and make sure that you are confident that you will be able to repay it and that you do not use it for buying things that you would otherwise not have purchased.
When we have a mortgage, we will be expected to pay money each month for it. With an interest only mortgage that will just be the interest on the mortgage but with a repayment mortgage that will be the interest plus some of the outstanding balance. Some mortgages are flexible though and will allow you to take a payment holiday at times. This means that you will be allowed to stop making payments on your mortgage for a while so that you have more money for other things. You may therefore consider taking a payment holiday so that you can take advantage of this. It is worth thinking this through though to make sure that it is a wise idea.
Impact on Your Credit Record
It is important to know that if you take a payment holiday on your mortgage it will show on your credit report. This means that even if it was fully approved by your mortgage company and part of your terms and conditions in the mortgage, it will show up. It could impact you if you want to take out another loan, if you want to change lenders or even if you want to start renting a property as your credit report is always checked in these situations. This means that you might want to consider your future and whether you have anything planned that this might impact.
It is important to remember that when you take a mortgage holiday you will need to repay the money at some point. This means that you will need to think about how you will do this. It might be that your lender will add it on to the end of your mortgage so that it will last longer or that they will add it to future repayments so that you have to pay more. Make sure that you look this up so that you can find out what the situation will be, then you will not have a surprise. Think about whether the method you will use will be something that you think will suit you. It can be easy to forget that you will have to repay this money from the payments that you miss, so make sure that you do not forget and you find out how they will need to be paid.
Having Extra Money for Now
The advantage of missing the mortgage payments means that you will have more money available for other things. You will need to think about whether you feel that t is worthwhile. If you are in a temporary situation where you need extra money, perhaps because you are out of work or have a particularly large cost for some reason then it could be helpful. However, you need to be aware of the disadvantages above and it could be a good idea to think about whether you really need the money and if you do, whether there are any alternatives things you could do. You might be able to spend less money elsewhere, find ways to earn some extra money, get an additional loan or something else. Consider whether there are any options which might be better for you, both with regards to the cost as well as the future implications.
It is a tricky decision and one that you should take a lot of time thinking about. We may find ourselves in a bit of a panic because we need money and so we need to try to remain calm and think through all of our options to make sure that we are making the right decision. Perhaps even considering talking it over with someone else could be good as they will be in a calmer mindset and therefore should be able to help you see things more clearly.
There are many people that invest in the stock market and even more businesses that will do so. You may wonder whether you should do the same thing. There is a lot to think about though and it is worth considering a lot of different things before you decide whether it is the right decision for you.
Risk of Losing Money
When you invest on the stock market it is not like putting money in a savings account. There is a risk that you will lose some of the money that you put in. This is because you are buying a share of a company and the value of the share will vary depending on the value of the company as a whole. So, if their profits go up or down, this will influence the value. It will also be influenced by any activity happening in the particular business sector it is in as well as anything happening in the world generally. Stock market investors can be jumpy which means that if there is any sign that their shares may go down in value, they will sell them. If lots of people sell, this brings the value of all shares down as they are all less desirable and yours could come down too. If a company collapses then the shares may be worthless. Of course, most people invest across a number of companies and number of industries to try to avoid being impacted by crashes in certain areas but it is impossible to avoid a whole stock market crash.
Length of Time to Invest
As the stock market will naturally fluctuate up and down, you will find that if you leave money in for longer, then this will be outweighed over time. However, it can take a long time to outweigh these and it is often the case that this could take at least ten years. This means that you need to be prepared to not use that money for a long time. This is also a minimum time as if the stock market does have a crash after nine years you will probably have to wait more than a year for your shares to increase in value again.
Amount of Money Needed
You will normally need quite a large sum of money to invest. You might be able to use a scheme where you slowly buy small amounts of shares monthly, but normally you might need to buy a big chunk with a lot of money. It will depend on how you set up your account, so you will need to look into this of course, to see whether it is something that you can afford
There will sometimes be fees if you have an account where you manage your shares. It could be that the fees are quite high and you may find that if you only have a small holding, you will end up paying more in fees than you gain in dividends or in the increase in value of the shares. So, this is something else that you will need to watch out for.
Types of Shares to Buy
If you do decide to go ahead you will need to think about what types of shares to buy. You will need to think about whether you want spread across the whole stock market, the top 250 companies, the top 100 or whether you want to pick a particular industry or one or more specific companies. There are pros and cons to each and it can hard to predict which might perform the best. A lot of investors will you a financial advisor to help them to pick.
There are lots of different types of mortgages and it can be confusing when you are choosing a mortgage or if you are wondering whether to remortgage. A tracker mortgage is a specific type of mortgage and it can have advantages and disadvantages. It is a good idea to find out more about it and what its features are so that you can decide whether it might be a good option for you.
What is a Tracker?
A tracker mortgage will have an interest rate which tracks the base rate. So, the lender will tend to charge a fixed percentage and add that on the base rate. The base rate is the interest rate set by the Bank of England. This means that whenever the base rate changes your rate of interest will change on your mortgage. The fixed part that you pay to the lender will always remain the same but the variable part will change.
What are the Benefits?
If the base rate falls, then your interest rate will fall and it means that you will pay less interest immediately. You may think that this will be the case with all variable rate mortgages but it may not be. Lenders do not have to lower their variable rate when the base rate changes and they may decide not to lower it or they may lower it but not by as much. If you have a fixed rate, then it will not change at all so if rates fall, then you will not benefit from this. They may even raise it in between base rate changes and you could end up paying more even if the base rate does not go up. This means that while the base rate is falling you will be paying less in interest.
It can often be the case that a tracker will be cheaper than other types of mortgage rate. However, this will depend on what the fixed percentage is that the lender charges on top of the base rate and how high the base rate is compared to the average variable and fixed rate mortgage. It can be good to have a tracker while the rates are falling as you can take advantage of those rate reductions, but of course, predicting whether the rates are going to fall or rise is not easy. You may feel that if they have been low for a long time they are likely to rise, but recently this has not been the case with very small rises being followed by a huge cut to historically low levels.
What are the Risks?
If you take out a tracker mortgage and the interest rates rise then you will pay more and more interest on your loan. This will mean that it gets more and more expensive. If you have a variable rate mortgage, it is likely that the rate would go up anyway as most lenders would increase their rates in line with the base rate. However, if you have a fixed rate, then you would protected from rate increases so this could be beneficial in this circumstance. As mentioned above, predicting rates is very difficult to do though.
It is worth calculating whether you could afford an increase in rates. Work out how much extra you would have to pay if rates increased. You may wonder how much to assume it goes up by, but rates have never historically been above 20% and it is unlikely they would jump up very quickly or by massive amounts, so perhaps work out how much more you would pay if it went up by 5% and then think about whether this is an amount that you feel you would be able to afford. Do remember though, that you are not normally tied in to a tracker mortgage, so you could switch to a different one if you felt it was just getting too expensive, but it is likely that others will be dearer as well.