Top 10 money myths set straight (From Daily Echo)

Top 10 money myths set straight

4:25pm Thursday 19th January 2012 in Money Saving Expert By Martin Lewis

Did you know you accidentally swallow eight spiders a year in your sleep? How about that you only use 10% of your brain? Well if you did, you’re wrong – they’re urban myths.

Worse myths abound in the money world, causing more danger, as they lead to bad decision making. So I’m donning my myth-buster helmet and to help clear fact from fiction.

1. You can get a parking fine in a supermarket car park

Not true. Shop and hospital car parks can’t fine you. Different rules apply to council car parks, but if a private company gives you a ticket, it's not a fine, just an invoice for alleged breach of contract. If you think it's unfair, write to reject it. They must go to court to enforce it – see moneysavingexpert.com/privateparking

2. Miss too many payments and you go on a credit blacklist

Not true. There's no such thing as a credit rating or blacklist. Each lender scores you differently based on its perfect-customer wish-list.

The tools they use aren’t universal either; they’re a mix of past dealings with the company, application forms and official credit files from the three credit agencies. One rejecting you doesn't automatically mean others will too – though if you’re a very bad risk, most companies have a similar attitude.

Ways of improving your score include getting on the electoral roll, keeping up payments on financial products, and spacing out applications, as lots of searches in a short space of time can damage your score.

3. Once you’ve got a cash ISA, you can’t move it.

Not true. You can switch your ISA to boost interest, so check your rate. Providers take advantage of people’s confusion to drop rates as low as 0.1%.

You've a right to transfer and keep it tax-free. Yet don’t just withdraw the cash; always fill in form from your new provider. For a full list of top payers, see mse.me/cashISAs

4. Dual fuel energy is cheapest

Not true. It might seem illogical, but while getting your gas and electricity from the same company’s usually cheapest, it isn’t always. Everyone should compare to see if they can save £100s on energy bills. Standalone gas and electricity suppliers sometimes win, so check both.

5. You only get cheap train deals a long time in advance

Everyone knows advance tickets are cheaper, but few realise you can often buy advance tickets the night before or, possibly, on route to the station (train firms' official policy is they're available till 6pm the day before, but some sell them later). So always check.

6. Third-party car insurance is the cheapest

Not true. While you’d expect lesser third-party cover to be cheaper than fully comprehensive, often it isn’t. This peculiarity’s because by selecting third-party, some companies assume you’re a higher risk so charge more. If you’re looking for the cheapest deal, get third-party and comprehensive quotes.

7. You don’t need to get buildings cover equal to your home’s value

True (you thought they’d all be myths, didn’t you!). Many people overpay by getting building cover that matches their home’s value. Yet actually you only need to cover a home’s ‘rebuild value’ – literally the cost to rebuild if knocked down.

8. Regular savings accounts dupe you over the interest

Not true. Put £3,000 in a 10% year-long regular saver (sadly none exist, but it’s easier maths to explain) and you won't earn £300. It'd be roughly £150 — this confuses and annoys many.

Yet there’s nothing wrong with this, as you only get interest on cash in the account at the time. As you drip-feed money monthly, it's only all in there at the end, so the average balance over the year is about half the final amount. You get about 10% interest on that. The top deal is First Direct’s 8% regular saver, but you need its current account.

9. If it advertises 8% APR, you could be charged 15%

True. Almost every loan and credit card APR is now 'representative' rate, meaning only 51% of accepted applicants get it, the rest pay more. Worse, the only way to know the rate is usually to apply, which hits your credit score.

Plaudits for Nationwide, as it uniquely tells you the rate before applying and for larger loans at least, is a best-buy.

10. Shops must honour pricing glitches

Not true. Shops aren't obliged to sell anything to anyone, so they don't need to honour price glitches. If a £200 Nintendo has a £10 price tag, it can refuse to sell at that price. Though once you've paid in-store, it's effectively a done deal (online it's once delivered).

So if it’s an error, you can’t make them sell it. Though if the mis-price is deliberate, not an error, it's a criminal offence, so report it to Trading Standards.