‘Public unperturbed by internet fraud’

October 16, 2007 at 10:30 am

Despite the fact that the papers are frequently full of horror stories about internet banking fraud, it seems from research carried out by Lloyds TSB, that we are as a nation unperturbed by the problem.

51% of us are unworried, even though 93% of us acknowledge that it is far from a “victimless” crime. 26% of us take the view that it’s “just one of those things”, 38% of us are complacent – safe in the knowledge that we will be reimbursed by our bank – and 48% of us are willing to take the risk because of the benefits in terms of convenience.

A mere 20% of people questioned feel that they really understand how to avoid becoming a victim, although 90% feel they have taken all possible steps to avoid a problem. Contrary to what one might think, it seems that the least-informed age group is the 18-25s, with only 15% feeling well-informed. The most confident are the over 65s with 29% feeling that they are on top of the problem. Men seem to feel better informed than women, with 26% claiming confidence compared to only 14% of women.

If you are one of those who feel they “could do better” the following advice may help:

  • Use strong passwords with a mix of letters and numbers such as “d0g” or “c4t” and change regularly.
  • Keep your details secret – do not divulge them to others, and do not write them down or store them on your PC.
  • Update your PC security regularly.
  • Check your accounts regularly in order to spot any suspicious activity.
  • Avoid using public computers for banking – if you have no alternative, make sure you are not being watched and always log off.

The following are common frauds perpetrated in the UK:

  • E-mail “phishing” scams – they may look genuine but they ask for personal details which should never be asked for by your bank.
  • Spoof websites – again, many look authentic but your bank will never ask for your password or memorable data.
  • E-mails that promise additional income – not only will you fail to receive the promised income but you could find yourself involved in illegal activity.
  • E-mails which state that you’ve won a lottery prize. They’ll askf ro private details so that you can claim your “prize”.
  • Virus hoax e-mails.
  • Suspicious phone calls – often asking to check the security number on your credit card.

Internet fraud is an issue no one can afford to ignore as it is spreading rapidly and appears to be taking in increasing numbers of UK victims every year.

It is clear that the banks are taking the time to prevent fraud but we as customers have to take responsibility and do our bit too. Sitting back and thinking it’s unavoidable is the best way of making life easy for the fraudsters and turning this into a self-fulfilling prophecy.

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‘One in four people in Britain fail to save money’

October 12, 2007 at 9:37 am

Even though only a few months ago, a survey by MoneyMood revealed that over the last year Britons have become far more likely to save their money than in previous years, a new study suggests that as a nation we are still very reluctant to save, with only 1 in 4 people spending rather than saving their money, this being a record low since the last half a century.

The study which was coordinated by the Post Office has found that over a quarter of those who said they don’t save are trying to pay debts, whereas a fifth are simply spending all they receive. Indeed, statistics from the Office for National Statistics show that on average British people are saving a lower proportion of their income than any time in the past 50 years. Furthermore, the majority of those who do save end up using their savings on holidays.

BBC economics editor Evan Davis argues that the results are not surprising because of the incredibly low interest rates of recent years. People are simply not tempted to save right now because they know that they will not get much more back if they do. He also says that in recent years, banks have offered low interest rates to encourage people to spend in order to boost economic growth, and this has in fact been successful. As he explains: “To some extent the economy has grown a lot and that’s been dependent on us not saving.”

Whatever the benefits for Britain’s economy, however, the new figures for how much money is being saved are clearly a serious issue for many. In fact a BBC poll currently shows that almost 60% of readers are actually worried they are not saving enough.

Should we all be worried? Evan Davis believes that by not saving a reasonable amount (i.e. over 2% of our disposable income), we are not best preparing for retirement, as even though we are saving more the richer we get, our expectations rise as well and we will want a lot more when we retire.

Experts believe that not saving is more of a serious issue for those who are self-employed. For example, in February a survey from pension services company Scottish Widows revealed that only about a third of self-employed people have money lined up for old age, and this is particularly concerning for them as they won’t be able to benefit from any pension schemes from their employers. Furthermore, almost 6 out of every 10 people who are self-employed are aged over 50, and many of them have larger debts than employed people due to the expenses of starting up their business.

Overall, all these statistics show that fewer and fewer British people are taking care of their futures by setting aside money for old age, a situation which could result in financial problems later in life.

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‘No more mortgage exit fees’

October 12, 2007 at 9:30 am

Choosing the right mortgage is a difficult and confusing process. Distinguishing between caps and collars, offsets and overpayments, sub-prime and self-cert, discounted and deferred and fixed and flexible provides enough to dazzle and bewilder the average homebuyer. It is no wonder that mortgage lenders are able to surreptitiously add an array of fees onto these mortgages.

Meandering through the mortgage minefield is indeed difficult, but ensuring that you have the right mortgage to meet your needs is important. The majority of UK homeowners fail to re-mortgage, costing themselves £1,000s over the term of their mortgage in additional interest. However, lenders keen not to lose high yielding loans have been increasing the cost of exiting a mortgage.

The role of the FSA

The FSA, the regulatory body for mortgage lenders has published a rather convoluted and long-winded explanation of mortgage exit fees which essentially rests on two fundamentals:

  1. Mortgage lenders were setting out arrangements for customers and then changing them to increase profits.
  1. This was unfair.

Furthermore, given the imbalance of power and knowledge between lender and customer, to ask the average homeowner to prove that a lender has acted in an unfair way is preposterous. The end result of this has been that lenders are now allowed to change mortgage exit fees only given a valid reason, and the only ‘valid reason’ is as an increase in costs for the lender to terminate a mortgage.

How have mortgage lenders reacted?

Of course lenders were not keen to give up a valuable source of income. However, HBOS, Cheltenham & Gloucester, Standard Life, Royal Bank of Scotland, Natwest and Northern Rock have all now ‘scrapped’ their fees.

Deputy Editor of the Guardian’s Money supplement Hilary Osborne actually states that according to the watchdog more than “95% of the industry, including all the major high street lenders, had opted to either scrap the fee, reduce it or revert to the original fee.”

However, such claims should be taken with a large pinch of salt. Mortgage lenders have a plethora of ways of adding fees on to their mortgages and with mortgages currently becoming increasingly unprofitable are unlikely to give up quite so easily. Rather than an exit fee, lenders are now simply adding on miscellaneous fees at the start of the mortgage or increasing their initial arrangement fees. The sickening thing is that by doing this they actually get your money sooner and are able to earn interest on it.

What to look out for?

When you get a mortgage you should receive a key facts illustration, a legal document provided for the majority of financial contracts that outlines the costs of the product you are buying. Make sure that you look at the rate you are receiving and the cost of any fees. It may well be worth seeking professional advice which will be tailored to your circumstances and help you to pick out the most cost effective deal for you.

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‘Loyal customers lose out on exclusive bank deals’

October 9, 2007 at 10:40 am

Different companies have always taken a different stance on who they give priority: the customers they already have that they don’t want to lose, or the new customers they want to entice to join. This has started to become a big issue in the banking industry as well, with Lloyd’s TSB the latest in a rising fashion to reject the old and concentrate on the new.

Lloyd’s has launched a new current account which has a very tempting interest rate only available to new customers. Their Classic Plus account now benefits from an incredible 6.4% interest for new customers, leaving behind existing customers, who only get the previous 4.25%. Apparently, now is the ideal time for banks such as Lloyd’s to appeal to new customers as switching bank is becoming more and more common. Indeed, according to the comparison firm Moneysupermarket, around 13,000 people switch their current account every day.

To qualify for this rate, you have to join the bank between now and 9th October and pay in at least £1000 every month. The interest rate only applies to the first £2500 in the account, after which the rate becomes comparatively unattractive at 0.1%. Though the account does not in the end appear to be as amazing as it looks on first glance, it is still a lucrative opportunity, as it means with an average balance of £2,500 you will be able to get a return of over £155. However, it is still worth nothing that though 6.4% is the highest rate on the market, it may still be better to stick with a bank that offers slightly less but indefinitely – such as Halifax’s high-interest current account at 6.17%.

However good the new account from Lloyd’s is though, one thing is certain – they are certainly shutting out the loyal customers, many of whom are frustrated by the new move. As Andrew Hagger, a spokesman for comparison firm Moneyfacts says: “This is another headline-grabbing current-account rate, but we can’t overlook the fact that existing customers have been neglected.” Indeed, just as the new bank-switching figures mentioned above could work to Lloyd’s favour, so could they also work against them by causing angry existing customers to switch elsewhere.

Ultimately, such new measures which shut out existing customers will, if increased, cause even more chaos in the industry, with customers transferring bank to get the better deals. It is always worth remembering with deals for new customers that, if you take up the offer, eventually you too will be “just” an existing customer. The cycle does go on but, however difficult it is to judge, what is most important is to try and stick with what is best for you both short and long term. Whilst some experts advise that you change often to get the best deals, some believe the hassle is just not worth it once you have comfortably settled down with a particular rate.

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‘Number of people seeking debt advice rising sharply’

October 9, 2007 at 9:49 am

Over the past few months studies have shown that debt is becoming an increasingly serious issue in the UK, with many people having to seek help to try and bring their finances back under control. Though it could be said that a comfortable amount of debt is not a matter for concern, it is still clear from recent figures that many are troubled by their finances. In fact, the Citizens Advice Bureau (CAB) has said that the number of people seeking debt advice has hit record levels and debt is now the biggest problem they deal with.

The figures from the CAB are indeed startling; apparently the offices receive 6,600 debt enquiries a day, and 1.7 million people have asked for debt counselling in the last year alone.

The types of problems people have are numerous. There has been, for example, an increase in both bankruptcy and mortgage-related concerns. Most common, however, are those problems resulting from an inability to pay credit and store card bills and other unsecured loans. There have also been many problems surrounding the payment of household bills such as gas and electricity.

The demand for debt advice is actually so high that the CAB claim they are finding it difficult to keep up with all the phone calls and visits, and urgently need volunteers to assist them with all the enquiries. They have already taken on more than 400 new money advisors but it is still a challenge.

Debt is increasing for many reasons. Not only has the cost of borrowing taken its toll on many households, but the consumer credit boom of the last decade has made it easy to borrow money, and therefore tempting for people to casually accumulate more and more debt. As CAB’s chief executive David Harker explains, “These figures are worrying evidence that while many have enjoyed the benefits of the credit boom, a large and growing number of people continue to pay the price.”

The CAB also blames many of the problems on banks and other financial providers, as many are not only unhelpful but also make the problems worse for those suffering from debt, by handing out money too easily to those who will not be able to pay them back, and offering packages that are not actually beneficial in the long-run. The CAB reports that many people don’t hide the fact they are on low incomes, yet are still lent thousands of pounds which they may struggle to repay over a lifetime.

Given how busy the CAB is, it is useful for those who are struggling with debt to be aware of some basic, provisional ways to manage their finances. For example, experts advise that one should be wary of borrowing more money and that debt problems cannot be ignored. It is also useful to make sure you are claiming all the benefits that you are entitled to in order to maximise your income. For those who are not sure whether their debt is really a problem, the BBC’s Debt Test may be a good starting point.

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‘Banks make

October 5, 2007 at 2:27 am

The Office of Fair Trading has indicated that banks could be making as much as £3.5 billion from penalty fees levied against customers who take their accounts over the authorised overdraft limits. The figure is an estimate released as part of an ongoing investigation by the OFT into the legality and fairness of charges made by banks against their customers.

Consumer groups such as Which? argue that the fees are illegal, as they go much further than covering the costs to the bank. The banks are effectively punishing their customers and using the charges to add to their margins. Eddie Weatherill, chairman of the Independent Banking Advisory Service, said, “I’d say 70% to 90% goes straight to the bottom line… to my mind this is a pure profiteering exercise.”

At some banks such charges can be as high as £30 per day. The British Banker’s Association would not confirm the figures, saying that banks were not obliged to disclose the breakdown of their earnings from charges. A spokeswoman commented: “These figures are commercially confidential, and they are not figures that the BBA has been provided with.”

However, it does seem that banks are getting the message that they will have to be more transparent about their charges. Claims made by dissatisfied customers led to banks paying out compensation of around £400 million in the first 6 months of this year. Two of the UK’s biggest banks have said they would alert people in danger of breaching their overdraft limit and incurring a charge. HSBC said they would display a message on cash machines, and Lloyds TSB said it would send a text message to warn customers.

Further still, some banks have also hinted that should they be forced to scrap or dramatically reduce these charges they may begin levying ‘maintenance fees’ on accounts. This would be an annual charge designed to cover the costs of administering the accounts, which the banks claim are currently covered by the penalty charges. One major bank hinted this charge could be as high as £300 per year for some customers. Cavendish Elithorn, a senior director at the OFT, dismissed this claim, commenting: “There’s no excuse for the £300 charge. It would raise between six and ten times the amount the penalty fees cost consumers.”

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‘Banks and Building Societies – spot the difference!’

October 2, 2007 at 9:31 am

Once upon a time it was easy to distinguish between Banks and Building Societies. The latter were where you kept your savings and applied for a mortgage, while the former contained your current account and allowed you to take out personal loans for big buys such as cars. Over the last twenty years, however, Building Societies have demutualised, and the differences have gradually disappeared, leaving many of us confused about how the two institutions vary. Recent research by has revealed that 1 in 3 of us are very much in the dark.

According to’s results, many of us think that the Abbey National, Alliance and Leicester, Cheltenham and Gloucester, Woolwich, and Bradford and Bingley are still Building Societies, whereas in fact they are all banks and, in the case of the Abbey, have been so for some 18 years.

The fundamental difference between the two entities is straightforward: Building Societies are mutual organisations owned by their members who have a say in the running of them. Banks, on the other hand, are owned by their shareholders who may or may not be customers and this is where a conflict of interest can arise between what is good for the shareholder and what is good for the customer.

Some detractors may feel that Building Societies have rather an old-fashioned image but these mutual organisations pride themselves on playing an important role in the local community, especially in rural areas. Unlike the banks who seem to have no qualms about closing down branches and encouraging customers to use telephone and internet banking, the Building Societies are doing their best to keep branches open.

It looks as though this loyalty is reaping rewards in terms of our perception of the two institutions.’s research shows that 61% of us prefer to take out a mortgage with a Building Society rather than a bank. 62% of us would favour a Building Society over a bank for discussing our personal finances, with only 22% of us preferring to sit down at the bank to have this type of discussion. 44% feel that Building Societies have “their best interests at heart” whilst 94% are of the opinion that banks are only interested in making profits.

This bias in favour of the Building Society could, however, mean that we are missing out on good deals on credit cards, savings accounts and mortgages – all areas in which various comparison tables feel that banks are a better bet. The head of Personal Finance at warns against our pre-conceived notions saying: “It seems that many of us are happy to cling on to the schmaltzy notion that building societies have our best interests at heart. But there is nothing romantic about paying more interest than you need on your credit cards and mortgages, and earning less interest than you deserve on your savings.”

In response, the executive director of Nationwide Building Society rejected Fool’s assertion, stating: “A key objective of the banks is to please their shareholders whereas at Nationwide we are able to focus on delivering long term good value to our members through highly competitive products and services.” He cites the free usage of the Nationwide credit card abroad and the lack of unnecessary fees in mortgage products as particular areas of value for customers.

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‘Banking for the under 18s’

October 2, 2007 at 9:28 am

There is always plenty of advice in the Press about bank accounts for students, but what should you do if you’re still at school and want to open a current account? You may well have a Saturday job which requires a bank account for your wages to be paid into or you may just want the convenience of being able to use a debit card for shopping or withdrawing cash from an ATM.

It should be possible to open a current account with a bank from the age of 11, although you are unlikely to get a cheque book or debit card until you are older. If you are under the age of 16 you may well need permission from one of your parents to open an account, so it is a good idea for them to go with you to the bank.

When choosing where to bank, don’t be too tempted by the lure of the freebies. Although money-off vouchers for high street stores may seem like a good incentive you should choose the bank which offers the best service for you. By all means look at the interest rates offered too, but if you are unlikely to have that much money in your account, the difference is not going to amount to much. If you are planning on saving reasonable amounts, then moving your money to a savings account is your best bet.

The important thing is to choose a bank that you can get to easily and preferably one with a 24 hour Customer Service line. Most banks are closed at the weekend so it can be handy being able to phone for advice, especially if you are unlucky enough to lose your card or cheque book when your branch is shut.

HSBC offers two accounts for 11 to 17-year-olds: My Savings, which gives interest (5.75% AER) and the linked My Account, which includes a cash withdrawal card. It is not possible to become overdrawn and customers can use their card to top up their mobile at an ATM. HSBC also offers the Schoolbranch facility run by pupils.

Lloyds TSB’s Under 19s Account can be opened from the age of 11, although for many of the services such as the Visa, debit card, internet and phone banking, customers have to be over 16. Younger clients are provided with a cashpoint card for withdrawing funds from cash machines. It is possible to make deposits at the Post Office which can be handy and the bank also offers commission-free currency. Interest on the balance is paid at 3.3% AER.

NatWest’s Card Plus account is for 11 to 18-year-olds and offers a debit card for use at home and abroad as well as phone and internet banking. Interest is paid at 3.15% AER and freebies include a wallet for cards, statement folder and paying-in book cover.
Barclays’ Young Person’s Account is for 16 to 19-year-olds although the Barclay Plus account is available for 11 to 15-year-olds. For the over 16s a Visa Connect card, internet banking, cheque book, direct debit and standing orders are available although with interest at only 1% AER, you may be tempted to look elsewhere.

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