The Internet has revolutionised the way we shop around for financial products. No longer do we have to waste our lunch hours in lengthy queues at the bank, or listening to infuriating hold music on the phone. Now, everything is just a click away.
But with new opportunities come new threats, and you need to be savvy when surfing your way to better deals. Here are five online blunders you must avoid:
#1: Not shopping around for insurance
Most insurers have cottoned on to the fact that people are increasingly buying their insurance online, and have started offering juicy discounts to attract customers to their site.
These are generally around 10%, but can be as high as 25%, which is a massive saving. However, it’s essential you base your decision not on who offers the best discount, but who has the best overall price for the type of cover you need.
The only way to do this is to take the time to compare prices at the various insurers. This needn’t be difficult or time consuming - simply use one of the specialist price comparison sites, like Insurancewide, designed to help you fish out the best deal for your specific situation.
Within minutes you can do several searches across a score of insurers that would take you hours to do by visiting the each individual site. Once you’ve got a shortlist of companies, dig into the detail of the cover to ensure that you are getting a quote for the precise cover you want and that you are genuinely comparing like with like.
#2: Wasting time and money on the wrong mortgage
Price comparison sites can also help you compare thousands of mortgages deals in a short space of time. Unfortunately, they don’t provide nearly enough information to tell you whether those deals are worth investigating further.
To save yourself the pain of searching for an attractive deal only to be let down you apply, why not go through a mortgage broker? This can be advantageous for a number of reasons:
It’s free: There are a host of ‘no fee’ brokers out there who get paid a fee by the lender instead of the applicant, so you’ve got nothing to lose.
Special offers: Not only will a good broker be up to speed with all the best deals currently available, they will also be able to access special deals that aren’t publicly available.
Work for you: Not only will they locate competitive deals, but once the mortgage process starts they can help to keep it on track by chasing and reminding.
While there’s no doubt a broker is helpful, it never hurts to do a little research of your own. Search some of the mortgage best buy tables to get an idea of what a competitive mortgage looks like.
Blunder #3: Overpaying for funds
There is little point in taking the time to ensure your investment portfolio is delivering impressive returns if you’re losing a large chunk of it in fund management fees.
When you purchase a fund (such as a unit trust) from a fund manager, you will pay an initial charge of up to 5.25%- that’s £262.50 on a £5,000 investment. If you want to switch later, then that’ll cost you between £150 and £300.
If you buy the same fund though a fund supermarket, however, the initial charge will be between £50 and £100 and with some funds it can even be zero. And when you switch, the cost of doing so can be as little as £15.
The fund supermarket is basically an administration system. It collects money from investors buying funds and passes it to the fund managers, and it provides current price information so you can see what your holding is worth at any time.
It also provides a consolidated valuation of all your holdings. The supermarket is paid by the fund managers – usually they pay 0.25% a year of the value of investments – so you don’t have to pay anything.
#4: Buying the wrong life cover
One of the main drawbacks when buying financial products online is that it’s difficult to ask questions or get an explanation of something you don’t understand.
So while it may be easy to find yourself a cheap price, there’s always a risk that you‘re wasting your money on something that’s wholly inappropriate for you. This can have particularly dire consequences when it comes to life assurance.
While it may be tempting just to search a few sites and opt for the lowest premium, it’s essential you take the time to consider exactly the type of cover you need so that you know your policy will pay out should the unthinkable happen. Ask yourself the following questions to get an idea of what you’re looking for:
• Which type of policy should you buy: term assurance, family income benefit, critical illness?
• How much cover do you really need?
• Should you and your partner get a joint life policy or two individual policies?
• Should you place the policy under trust?
The answers to these questions depend on your personal circumstances and needs, and unless you have a very thorough grasp of these and how life assurance works, I recommend you use a service where you can get advice on these issues.
#5: Play fast and loose with your details
With the advent of online shopping and social networking sites, people are uploading more information than ever before onto the Internet. Fraudsters have woken up to this fact and are increasingly targeting their ID theft scams online, making it essential you protect your personal details.
The best place to start is ensuring your gateway to the virtual world, your computer, is adequately protected. Install anti virus software, making sure it includes a firewall, which essentially shields your personal files or details from prying eyes when online.
You can download this software for free online, or alternately you can buy more popular products like Norton or McAfee from any electronics store for around £40. Once you’ve done this, avoid entering your details on any computer other than your own.
Next up, think carefully about the information you post online. Facebook is a great site for keeping in contact with old friends, but it also gives fraudsters access to loads of personal information, from date of birth to phone numbers (all useful information for ID theft).
A random sample of 200 users in the London Facebook network by anti virus company Sophos found 75% allowed their profiles to be viewed by any other user. With over a million users in London alone, it’s clear fraudsters are being spoilt for choice. Use common sense before you post anything online, as it’s not just old school friends who are viewing your profile.
