Banks have branched out into every aspect of our finances, but a lot of their products offer terrible value for money.
Whether it’s mortgages, personal loans or payment protection insurance; if you want it, your “local” bank has it. And because we already have an established relationship, we often choose to buy straight from them rather than go through the hassle of shopping around at providers we’re unfamiliar with.
It’s an understandable decision, but one that can cost you thousands of pounds, as we show you below.
Best banks accounts comparison table
1: Payment Protection Insurance
Whenever you borrow money – be it for a mortgage, personal loan or credit card – you can opt to purchase insurance that will meet your repayments should you become unable to pay for whatever reason.
If you decide you would like payment protection insurance for your loan, make sure you never simply accept your bank’s, as this is always far more expensive than purchasing a standalone PPI policy elsewhere.
As an illustration, Halifax will charge you £2,376 for PPI cover for a £10,000 personal loan repayable over four years, while Lloyds TSB offers it for £2,159. But go to British Insurance and you can get cover for just £455, or less than a quarter of the price offered at your bank.
Pay less for your payment protection insurance
| Provider | Cost |
| Lloyds TSB PPI | £2,159 |
| Halifax PPI | £2,376 |
| British Insurance PPI | £455 |
Potential Saving | £1,921 |
2: Personal loans
We’ve just showed why you shouldn’t tack your bank’s PPI on your loan, now we’ll show you why you shouldn’t even accept your bank’s loan in the first place.
Halifax offers a £10,000, four year, personal loan at a rate of 7.9% and a total cost of £11,794.13. NatWest offers the same loan with an 8% APR, although it actually works out cheaper at £11,655.84.
But if you went instead to MoneyBack Bank, you could secure a loan with a 6.7% APR and a total cost of £11,392.32 – over £400 cheaper than Halifax.
Compare personal loans
| Provider | Rate | Cost |
| NatWest | 8.0% | £11,655 |
| Halifax | 7.9% | £11,794 |
| MoneyBack Bank | 6.7% | £11,392 |
| Potential Saving | | £401 |
3: Top mortgage rates
Buying a house is one of the most important financial decisions you will ever make, yet some customers still don’t shop around, trusting their own bank to find them the cheapest mortgage instead.
Needless to say, this can prove a costly mistake. As an example, let’s assume you are a first time buyer who has a 5% deposit and is looking for a two year fixed rate mortgage with a 95% loan to value.
Barclays currently offers a staggering 6.79% on its two year fix, and tops off the terrible deal with a hefty £995 arrangement fee. NatWest customers would fare better, as it offers a 5.99% rate with a £699 fee. But the Post Office offers a far better deal than both, with a 5.48% APR and a £399 fee.
Compare fixed rate mortgages
The difference in price is astounding
Now let’s assume you had to borrow £150,000 (repaid over 25 years) to afford your house. After two years, your total cost including the fee would be would be £25,955 with Barclays, while at NatWest you would have spent £23,872.
Had you opted for the Post Office mortgage, your costs would be £22,463, or nearly £3,500 cheaper than Barclays. Of course, the point of this illustration is the importance of shopping around; showing that you can find good deals where you might not usually expect. It’s obviously not to say that you should avoid banks for mortgage deals altogether.
| Provider | Rate | Cost |
| NatWest | 6.79% | £23,872 |
| Barclays | 5.99% | £25,955 |
| Post Office | 5.48% | £22,463 |
| Potential Saving | | £3,492 |
4: Travel Insurance
We’ve not been back at work a full month yet, and no doubt many households are already planning their next holiday abroad. Travel insurance provides you with valuable peace of mind while away, and the good news is it costs less than ever before – provided you buy it from the right place.
An annual multi-trip for a family of four to any location in the world (including baggage and winter sports cover) will cost you £180 at Barclays, while HSBC charges a slightly lower £147.
But go to a specialist insurer, such as Insure & Go, and you can get identical cover for £80.
Get a travel insurance quote
| Provider | Cost |
| HSBC | £147 |
| Barclays | £180 |
| Insure & Go | £80 |
| Potential Saving | £100 |
Shopping around is essential
So there you have it, just by choosing to shop around rather than buy from our bank, we have saved £5,915.
This is not to say your bank is offering you a terrible deal on all its products. Rather, it’s a simple fact that no one organisation is cheapest for everything (regardless of what their adverts tell you).
Companies set their prices according to their business structure. If, for example, they decide they want to grow their fixed savings business, they will offer their cheapest deals there in order to undercut other providers and attract new customers. Once they achieve this, they will again bulk up rates and focus on a new area to grow.
What this means is it’s essential to always shop around for financial products to see which provider is offering the cheapest deals at that point in time.
