Personal Finance

Personal Finance, Scams & Cons Exposed.

Using accounting methodologies where appropriate, we focus on aspects of personal finance in an attempt to expose legalised disingenuous and underhanded corporate behaviour that has become rife in a quest for greater profits.

The conclusion we have drawn, following conversations with the layman on the street is; most people seem to be completely oblivious!

Our examples below are all based on businesses that operate throughout the UK; however, we have no reason to believe that this is not a global epidemic.

The sad fact of the matter is, corporate morality no longer exists and you need to be on your guard at all times!

If you know of anymore, please let us know via our contact us page.

1. Banking

   0% Commission on Foreign Currency - Lie!

   This is a just question of semantics, if the bank buys foreign currency back at a rate that is less than what they sell; then by definition they are charging commission.

   Example: You go to your local bank or foreign currency exchange bureau that is adverting 0% commission on foreign currency.

   Ask if the rates advertised for buying and selling are constant for that day.  Next choose any common advertised currency (i.e. Australian or US dollar).

   Calculate how much foreign currency you could purchase (use the selling rate) with say 1000 units of your own currency, (i.e. GB pounds).

   Now take the calculated foreign currency figure and convert in back to your own currency using the buy rate.  Chances are you are now at least about 2 to 3 percent lower than your original figure?  We've just calculated the variance between the buying and selling rate of one major high street bank to be as much as 14%  Please see example below: -

   Buying $1.4665 per £ (as @ 16-11-2011)

   Selling $1.7047 per £ (as @ 16-11-2011)

   Therefore: -

   £1000 x 1.4665 will buy $1467.

   However, using the selling rate above for the SAME day: -

   $1467 ÷ 1.7047 will only buy £860.56 back!

   Thus: -

   £860.56	x 100  =  86.06%
   £1000

   Therefore 13.94% Commission!

    

   0% Interest Paid for Money in Your Current Account

   We would expect that at least 99% of the population with bank accounts and money in their account are not surprised to see their bank statements showing a credit balance, however accountants and bookkeepers might expect to see otherwise.  The reason your statement shows a credit balance when you have money in your account is because to the bank your are their creditor.  Thus, in essence, they owe you money.  Basically, you have signed up to giving your bank an interest free loan for the life of your account!  Very kind of you.

    

   Tiered Interest Paid for Money in Your Current & Savings Accounts

   When a business is loaned capital by investors, subject to share type, dividend payments are normally proportional to the number of shares held by a given investor.  Thus, you might wonder why tiered interest accounts exist.  In reality, there is no reason why savers with a £100.00 should not be given the same rate of interest as those with £100,000.00.  Why do children's saving accounts interest rates differ for adults?  At the end-of-the-day, it is all money loaned to the bank.

    

2. Cars & Motor Vehicles

   Taking your car for in for service or repair to an authorised dealership or otherwise opens potential victims up to a cornucopia of potential scams.  Don't assume just because you use an authorised dealer it will all be OK.  Dealerships will often prey on their clients' false sense of security and trust.  Never give the impression of being naïve, if you do, your a "sitting duck"!

   Here is just a few common scams to watch out for: -

   1. Charged for oil replacements not carried out.
   2. Charged for replacement bulbs, never actually replaced or needing replacement.
   3. Charged for break pad replacement when pads do not need replacing.  Pads might not even be replaced.
   4. Charged for oil and air filter replacement and never actually replaced.
   5. Charged for alleged blown fuses.
   6. Overcharging for labour.
   7. Attempt to charge for FREE estimate if you decide not to proceed!
   8. Estimates given without including VAT!  Unless a business is paying for the service and can claim back the VAT, then why not state the gross price?

    

    

3. Credit Cards

   The credit card market is hugely competitive and brands will always resort to offering incentives to make their credit card offer more appealing than others.  These incentives can include air miles and points that you can use to purchase days out for example.  However, most credit cards will include 0% offer on purchases for a set period of time and 0% on balance transfers for a period of time.  When searching for a credit card you need to assess what your needs are and what the intended use for the credit card will be because it is all too easy to fall into debt with credit cards.  Make sure you fully understand what you are signing up to and are not blinded by the incentives they offer.

   A good way of comparing credit cards is by comparing the cards APR (Annual Percentage Rate) that is calculated over the whole year rather than on a monthly basis.  This rate of interest for existing balances and the charges imposed on merchants negates the need for the banks to charge an annual fee to card holders, although some still do!  APR was introduced when an Act of Parliament passed the Consumer Credit Act in 1974.  All credit cards in order to remain compliant must state what their APR is.  The APR includes important factors such as the interest rate you must pay, how you repay the loan and the length of the loan agreement.  You will usually find, the lower the APR the better the deal however you should also be aware of the different types of APR.

   • APR Typical - means that at the very minimum the lender expects that 66% of people applying for this card will get this rate but the actual rate you pay will depend upon your personal circumstances.
   • APR Typical Variable – means the same as APR Typical but that the rate can also go up and down during the lifetime of the product.  The rate could change for a variety of reasons including changes in Bank of England base rate and certain lenders will base it on the standard variable rate; however you should always read the small print before you take the credit card and make sure you know exactly what you are paying for.

   If you already have a credit card and the rate is no longer the best on the market then you need to start looking for another credit card with a good APR and offers a balance transfer capability.  This will mean that you can transfer your current credit card balance on to the new card offering a smaller rate.  Quite often they will offer an incentive period with a 0% rate to lure you to the take out the card, this means that once you have transferred your balance on to the card you won't be charged interest on that balance until the end of the incentive period.  However, some lenders will charge a fee to transfer the balance so you should always make sure you are aware of what this balance transfer charge is before you take out the credit card.  This can be an excellent way to lower you potential credit card debt by minimising the interest accrued but you do need to keep track of you credit card debt if you intend to continually move that balance from card to card.

   Searching for the best credit cards has become easier as many of them are available to compare and purchase online.  You can also easily search for the card that is the best suited for your situation and keep up to date by signing up for newsletters from price comparison websites who will keep you updated on when a new credit card deal on the market as well as other finance deals.

   NB: Where cash advances and purchase transactions remain outstanding and balance is not paid in full, less scrupulous credit card companies may off-set repayments against transactions accruing the least amount of interest rather than the greatest.

     

4. Food

   Now this one is a complete minefield, each time you visit the supermarket you are being covertly coned right under your nose.  You might think you are protected by Trading Standards and to a point that might be true; however, like with everything else, it is just a numbers game.  If Trading Standards get wind of these cons, they may decide to fine the company, but these fines will be much less than the sales revenue generated from the disingenuous trading practices; thus, with morality no longer an issue, there's no real incentive to stop.  Now lets take a look at some examples: -

   Manufactures Cons

   • Subtle container or package size reduction.  Keeping all labelling the same but reducing the container size by as much as 20%.  Normally done in smaller steps over a period of several months.  A favourite way of doing this is introducing the "Limited Edition" product that is normally smaller than the standard product to test if the consumer notices the difference in size.  Unfortunately most consumers don't and thus this gives the manufactures a degree of confidence to apply these size reductions carte-blanc across their entire product range.  (Example, yoghurt pots, chocolate bars).  For trading standards reasons product weight must be included and these size reductions will be reflected in the weight change.  Thus, always check your products weight markings!
   • Keep package size appearance exactly the same but reduce the contents.  This can be easily achieved in one of two ways: -
     1. Leave more space/fresh air in box or container
     2. Bulk up the padding inside with additional partitions or spacing
     This type of trick of very popular with the biscuit industry.
   • Doing away with larger sizes from a product range, manipulates the consumer into purchasing greater numbers of smaller ones.  With a higher per/gram price, this is also proving very popular.  Note: Retailers can also be perpetrators of this particular con by only stocking smaller sizes.
   • Tinned food can be "watered down", quite literally or just by reducing the solid contents with more sauce.  (Example Baked Beans)  How much juice do you get in a tin of beans today!  Almost baked bean soup!
   • Repackaging is another favourite, change the shape of a box, update the image on the front, include the term "New Improved Recipe" and reduce the box quantity by one.  (Example cereal bars)

    

   Retailer Cons

   These cons are very cleverly applied and can only be avoided by the most studious of shoppers.  Supermarkets especially work on the proviso that most customers don't check their receipts and family's doing weekly shops are unlike to notice the con.

   • Special offer baskets - fill a basket with one product with two flavours and imply both are on special offer.  If you check your receipt afterward, you might find you have been charged full price for one or both.
   • Special offer labels placed such as to allow consumers to misconstrue the item on special offer.  By the time you get to the till they know many consumers will feel too embarrassed to make a fuss and buy the product despite the fact they know they have been coned.
   • Items marked as special offer on shelves where offer date has actually expired but offer label has not been removed and thus, you will be charged full price when item is scanned at till.
   • Items where larger quantity product is actually more expensive per gram than the small version.  Thus always check the price per 100grams.
   • Giving a price for a brand name product per kilo, next to their own brand version marked up with a price per 100 grams.  This creates the impression that the brand product is super expensive, when in reality, once you do the maths, you find there is normally only at most a couple of pence difference!  Many own brand products contain high amounts of salt, sugar and saturated fats!

    

   NB: Remember if the price stays constant, but weight is reduced, then by definition the price has increased.  Watch out, you've been warned!

    

5. Money/Energy Saving Home "Improvement" Replacements

   Gas

   Boiler "Upgrades"

   There's a good chance with energy prices constantly on the increase you might be tempted into upgrading your boiler for a more efficient model in order to save money?  There is bound to be some special promotion or discount if you decide to sign up immediately.  However, if saving money is your primary objective you should consider the following: -

   • What is the life expectancy of your existing boiler?
   • How much on average are your existing bills per year?
   • How much will it cost for a boiler upgrade?
   • How much more efficient will the new boiler be compared to your existing one?  Thus, what savings are you likely to make per year?
   • Will you need to include any additional costs that might be associated with a boiler upgrade (decorating etc)
   • What is the life expectancy of the new boiler?
   • Estimated percentage rise in gas prices / per year
   • Could you get a grant from the government towards the cost of a replacement?
   • If the money you intend to spend on the replacement was instead left in the best available savings account how much money would in make in interest?

   OK, so with all the above in mind let's take a look at a few scenarios: -

   SCENARIO 1

   A household currently spends approximately £500 per year on their gas bills.  A boiler replacement package will cost £4000.00 and is expected to last for approximately 15 years.  Interest on their savings is 3%.  Gas prices increase on average by 15% per year.  The new boiler is expected to be 40% more efficient.

   Assuming a constant level of energy consumption: -

   Keep Existing Boiler

   Cost of gas over 15 years = -£23,790.00

   Savings of £4000.00 + interest @ 3% = £6232.00

   Balance = -£17,558.00

    

   Boiler Replacement

   Cost of gas over 15 years (with a 40% increase in efficiency) = -£14,274.00

   Cost of replacement boiler = -£4000.00

   Balance = -£18,274.00 (Worse off with boiler replacement)

    

   SCENARIO 2

   A household currently spends approximately £1000 per year on their gas bills.  A boiler replacement package will cost £4000.00 and is expected to last for approximately 15 years.  Interest on their savings is 3%.  Gas prices increase on average by 15% per year.  The new boiler is expected to be 40% more efficient.

   Assuming a constant level of energy consumption: -

   Keep Existing Boiler

   Cost of gas over 15 years = -£47,580.00

   Savings of £4000.00 + interest @ 3% = £6,232.00

   Balance = -£41,348.00

    

   Boiler Replacement

   Cost of gas over 15 years (with a 40% increase in efficiency) = -£28,548.00

   Cost of replacement boiler = -£4000.00

   Balance = -£32,548.00 (Better off with boiler replacement)

    

   SCENARIO 3

   A household currently spends approximately £750 per year on their gas bills.  A boiler replacement package will cost £4000.00 and is expected to last for approximately 15 years.  Interest on their savings is 3%.  Gas prices increase on average by 10% per year.  The new boiler is expected to be 40% more efficient.

   Assuming a constant level of energy consumption: -

   Keep Existing Boiler

   Cost of gas over 15 years = -£23,829.00

   Savings of £4000.00 + interest @ 3% = £6,232.00

   Balance = -£17,597.00

    

   Boiler Replacement

   Cost of gas over 15 years (with a 40% increase in efficiency) = -£14,298.00

   Cost of replacement boiler = -£4000.00

   Balance = -£18,298.00 (Worse off with boiler replacement)

    

   SCENARIO 4

   A household currently spends approximately £1000 per year on their gas bills.  A boiler replacement package will cost £4000.00 and is expected to last for approximately 15 years.  Interest on their savings is 3%.  Gas prices increase on average by 10% per year.  The new boiler is expected to be 40% more efficient.

   Assuming a constant level of energy consumption: -

   Keep Existing Boiler

   Cost of gas over 15 years = -£31,772.00

   Savings of £4000.00 + interest @ 3% = £6,232.00

   Balance = -£25,540.00

    

   Boiler Replacement

   Cost of gas over 15 years (with a 40% increase in efficiency) = -£19,063.00

   Cost of replacement boiler = -£4000.00

   Balance = -£23,063.00 (Better off with boiler replacement)

    

   Thus, in conclusion it will not always be financially viable going for the upgrade.  The financial viability will depend on a number of factors, but primarily how much gas you expect to use and being able to predict how much gas prices are likely to rise over the life expectancy of the new boiler.

   From and environmental stand point, the more efficient replacement boiler will always win hands down, although making sure you don't have the boiler temperature set too high (much above 50°C), could ensure you save copious quantities of gas even with your existing boiler.

   Remember, the greater the difference between boiler water temperature and room temperature, the greater the energy required to keep it there!

    

   Annual Service

   After your annual service has been completed check your thermostats and boiler temperature controls are set to original (pre-service) values.  You might find they have been turned up to ensure you burn more gas.

   Also check your water pump, if this is set too high it will potentially be making a noise all the time and will also ensure the pumps life expectancy is reduced.  Guess what, these aren't going to be cheap to replace, unless of course you sign-up to a top-of-the-range service contract with top-of-the-range prices!

    

   Double Glazing

   There's no doubt that having double-glazing is more energy efficient than single glazing.  However, we suggest you apply the same principles as we have above to gas and boiler replacements.

   How much heat is lost to the environment through single-glazed windows compared to double-glazed windows could to a large extent depend on the mean external air temperature.  If you live in a cold environment, double-glazing is going to be far more cost-effective than if you live in a place close to the equator or where the mean temperature is high.

   Again, double-glazing does not last forever, so take into account the potential energy saving over the life of the product to see if you can recoup your investment.   If no, then you might only be doing it for ethical reasons.

    

6. "Payday" Loans

   The term 'Payday Loans' has become synonymous for 'legalised extortion'.  Unfortunately the companies that offer 'Payday loans' prey on those that are the most desperate.

   'Payday loans' may come with an arrangement fee on top of extortionate rates of interest and should be avoided at ALL cost.

   Use our Payday loans evaluator to expose the true costs and comparisons.

   The rules and regulations that govern financial payday loans companies state that they must show you the Annual Percentage Rate (APR).

   For obvious reasons they prefer to focus on the amount you pay back in total rather than on APR.  If you focus on the APR you might realise just how much you are being ripped off!

   Note: The term "Payday" refers to a type of ultra high interest, short-term, loan and NOT a specific company.

7. Postal Service

   To the best of our knowledge, these are UK specific cons that have just recently come-to-light, although it may well be true in other counties as well?

   1. If you believe that "First Class" post means guaranteed next day delivery as it once did, you would be very wrong!   By the way, we don't just mean excluding the pre Christmas period.  Basically, now under their new modus operandi, in order to "guarantee" next day delivery you need to pay for an additional premium service "Special Next Day recorded delivery"!  There's nothing very "regal" about this except the price!
   2. Overseas Charges - Anyone who has been to Australia might wonder why the cost of posting a letter FROM Australia TO the UK is only a fraction of the cost of sending the same letter FROM the UK TO Australia.  If anyone knows why, please let us know, as we do not.