Paul's Insights: Time to flex your money muscle
The COVID-19 pandemic has seen Australians hunker down their finances - spending less and tucking away more cash. That's seen our household savings rate jump from 3.5% (of income) in 2019, to 5.5% at present. But plenty of people could be missing out on easy ways to boost their bank balance.
The beauty of pushing for a better deal is that you could continue to pocket savings year after year. This is especially the case when it comes to your home loan. Mozo found 80% of Australians say they’re dissatisfied with their mortgage provider, but half these home owners never take a close look at their loan and switch to a new mortgage.
Getting better value doesn’t have to mean refinancing. Mozo has found haggling carries a high possibility of success: If you push for a discount, three out of four times you’ll get one.
Requesting a rate discount can be as simple as picking up the phone and talking to your lender. Or ask your mortgage broker to do the negotiating for you. If you don’t score a discount, be prepared to call the bank’s bluff and threaten to leave. With home loan rates as low as 2.29% it can pay to move on.
It’s a similar story with credit cards. Reserve Bank figures show the average rate among ‘standard’ credit cards is a whopping 19.94%. That’s nearly 80 times the cash rate (of 0.25%), the widest the gap has ever been according to Finder. Even among low rate cards, the average rate is 12.93%. But if you shop around, you’ll find some credit unions have card rates below 10%.
Despite the scope to save, Mozo says that across all our financial products, Australians are least prepared to compare and switch their credit card. If you’re staying with a high rate card because of reward points, you could be up for disappointment. Rewards have plummeted recently as card issuers try to protect profit margins.
Be prepared to haggle for discounts on bills like energy and insurance too. For the cost of a few minutes of your time checking out prices online, you could be rewarded with valuable extra cash. It’s a simple way to boost household savings without scrimping on your lifestyle.
Paul Clitheroe is Chairman of InvestSMART, Chairman of the Australian Government Financial Literacy Board and chief commentator for Money Magazine.