A thrifty person is concerned not only by their incoming and outgoing funds, but also what happens to it in the meantime. To ensure you’re making the most of your money, find the right banking plan to suit your lifestyle.
Bank accounts
A true bargain hunter — as with every aspect of their life — shops around when it comes to choosing a bank account. Whether you’re looking for a general day-to-day account for your minor expenses or a high-interest savings account for the big bucks, you should do your research in order to secure the best deal.
Different banks, building societies and credit unions offer varying fees, charges and interest rates. To maximise your money, look for savings accounts that offer high-interest returns.
The bank and type of account you choose should suit your purposes and give you flexibility when managing your money. Always ask about annual fees and terms and conditions associated with each account. Also find out if you have access to your savings accounts with features such as online banking and phone banking and whether you will be penalised for withdrawing funds at any stage. If you’re saving up a deposit for your first home, you’ll most likely be happy to open an account that accrues high interest rates on the condition you don’t touch the funds. Forced saving such as this will ensure your deposit is ready in no time.
When investigating different account options, you should contact your existing bank to see what they can bring to the table. As a loyal customer, they may be willing to offer you a good deal in order to retain your business. Not only will you secure a beneficial arrangement and be able to link all your accounts, you’ll also avoid the hassle of joining a new organisation.
There are a variety of websites that allow you to compare the different account options available. Check out:
www.savingsaccounts.com.au
www.banksavingsaccounts.com.au
www.savingsaccountfinder.com.au
Credit cards
When researching credit cards, the most important factor to consider is your lifestyle and how you intend to use the card. Interest rates, annual fees, interest-free periods and rewards programs differ from card to card, so you must consider your habits to find out what suits you best. Whether you are planning to conscientiously pay off the balance each month or make some major purchases, there will be a credit card out there that matches your spending habits.
Before selecting a card you should ask yourself:
• Will you pay it off every month or just the minimum amount required?
• Do you already have multiple cards?
• Do you buy expensive items?
• Do you travel a lot?
• Do you spend a lot on your credit cards or is it for emergencies only?
If you rarely use your credit card, or if it’s intended only for emergencies, you may want to consider getting a no frills credit card with low annual fees. While you won’t get any bonuses such as reward schemes, you won’t be hit with high interest rates or cumbersome fees.
If you are planning to fully repay the dollars you spend every month, you should consider an interest-free period credit card. This period lasts from the time you make your purchase until the time the issuer starts to charge interest. Some cards offer a free period of up to 55 days while others are longer and some none at all.
If you are planning to use your credit card for major buys, you should look for a low interest rate card. This way, while you’re taking your time making repayments, the interest accrued won’t be too hard to handle.
If you already have several credit cards, you may wish to consolidate them in order to minimise annual fees. Most banks offer a ‘balance transfer’ deal in which the amount outstanding from the transferred credit card is charged a lower interest rate for a set period of time. This allows you to take control of your debts and get rid of them quickly.
If you are planning to hit the stores in a big way, you should look for a card that offers a rewards program. Each time you make a purchase you will accrue points that can eventually go towards more shopping or airfares. While such programs may invoke higher annual fees, they may be worth it in the long run for the benefits you receive.
To compare different credit cards, check out:
www.creditcards.com.au
www.comparecreditcardsaustralia.com.au
www.creditcardfinder.com.au
Home loans
Choosing the right home loan will help you save money and pay off your mortgage quickly. The best home loan will depend on your lifestyle, spending habits and plans for the future. You should ask yourself:
• Do you want to pay off the loan as quickly as possible?
• Can you stick to a budget?
• Will you still be able to make repayments if interest rates rise?
• Is your financial situation likely to change in the near future?
• Are you planning on having a baby in the next five years?
In general, the more flexible your loan, the more interest you’ll pay. For example, a variable loan that allows you to redraw against extra repayments or offset savings against the mortgage will generally have a higher rate than a basic loan. Despite the higher rate, it may be beneficial to include such extras in your loan. For instance, if you have the option to make additional payments anytime you have some spare cash lying around, you can reduce the amount owing as well as the interest. It’s better to be paying off your loan (that charges interest rates upwards of 6.5%) than having your money sitting in a bank account (only accruing interest of up to 5%).
In turn, a redraw facility allows you to access these additional repayments as you need them. You can then use this money elsewhere without having to justify or apply for it. Always keep in mind, however, that these services will generally attract a fee every time you use them.
Another option is to establish an offset account. This is a savings account attached to your loan account; its balance is subtracted from the overall loan owing when calculating daily interest charges. For example if you have a $500,000 mortgage and $50,000 in your offset account, you will only be charged interest on $450,000. This saves tax and reduces your home loan.
When establishing your home loan, you need to consider whether you will opt for a variable or fixed rate. The latter is a good option when you’re unsure of what rates are going to do. A variable home loan interest rate moves up and down with market interest rates, determined by the Reserve Bank of Australia.
A fixed interest rate, on the other hand, will not change during the fixed period. This type of loan is advantageous if interest rates rise; if they fall, however, the borrower is worse off because they do not benefit from the fall in variable rates.
If you are worried about interest rate rises, you can always split your loan between variable and fixed rates and take an ‘each-way’ bet.
To compare loans and find one to best suit you, check out:
www.xinc.net.au
www.home-loans-australia.com.au
www.homeloanfinder.com.au
