Switching to save money

You've already got your bank accounts, your insurance, your loans and credit cards. You shopped around for a good deal when you got them. But products change. Are you sure there's not something better out there?

Maybe you've thought about switching products but feel it's too much of a hassle. But it's getting easier. The Government and financial institutions are changing things to make switching easier for you.

A few simple steps will make sure you're getting the best deal you can. It's worth making the effort to shop around. You could end up saving more than you think.

• Step 1: Know your products
• Step 2: Shop around, see what else is out there
• Step 3: Do your sums, check it's worth switching
• Step 4: Approach your providers and get a better deal

 

Step 1: Know your products

To get 'a better deal', you want to improve on what you're getting now. To do that, you need to know what you've got.

Read through old statements. Check what fees and charges you've been paying. Read through the paperwork for your current products. If you haven't got an up to date brochure or Product Disclosure Statement or agreement, ask for another copy. You may also be able to find details on your provider's web site. Remind yourself what product features you've been paying for.

There may be conditions that mean you could pay more or get less in certain circumstances. You could read your statement and discover you're paying fees that you never knew existed! Be on the look out for any exit fees or charges that may apply if you decide to end your current arrangements early.

It also pays to check whether you're on a special deal with your current provider. For example, some financial institutions offer a special deal on bundled products. If you want to switch one product out of a bundle, you may lose any discounts or benefits on the rest. Find out if you can switch the whole bundle to another provider.

Are you satisfied with the service you get? Have your needs changed since you bought your products? Are there other products out there that would be better for you? If it's been a while since you had a look at your finances, it may be worth updating your budget and revisiting your money plans.

Tip If you decide to switch a transaction account or a credit card account, don't forget any regular payment arrangements you may have. If your pay goes into your transaction account, give your employer your new account details. If you've got routine bill payments or loan repayments coming out of your old account, move them over to your new account. If you miss a payment you may have to pay penalty fees. Ask your old financial institution for a list of your regular debits and credits, and ask your new financial institution to set them up in your new account.

 

Step 2: Shop around, see what else it out there 

This step is all about hunting for the deals that offer what you're after at the right price. See if you can find something better than what you have now.

You can get a feel for what's out there by checking out the money pages in the newspaper and browsing some money magazines and financial newspapers. The articles and advertisements can be a useful guide but it's probably best not to jump at the first attractive product you see until you've done your homework.

You can get more detail about what you'll get and what it will cost from the internet. Websites such as Cannex and Infochoice have detailed summaries and ratings of a wide range of products.

If you've got an interest in a particular provider, you could get more information directly - surf the net or let your fingers do the walking ... or your feet for that matter! Word of mouth is another way that people learn about good deals.

As you narrow your search down to a few main contenders, find out as much as you can about their products - what you get and at what cost. Make note of any start up or application fees that could apply as these can increase your switching costs.

Building on Step 1, you can focus your search on the products that offer a better deal, particularly in the areas where you're not satisfied with your existing product.

Step 3: Do your sums, check it's worth switching

If you find a product that offers more, stop to weigh up the pros and cons.

When you're looking at different products, the main things to compare are:

• Interest, fees and charges

  Compare the annual rate of interest, application fees, early termination fees, late payment fees and other penalties, counter-service fees, charges for extra service features.

• Features

  Some deals might include a range of features that are considered 'standard' whereas other deals - that may seem cheaper on the surface - may charge you extra to use these services. Pay special attention to the features you need or currently use.

• Conditions

  There may be situations where you don't get the service or would have to pay extra for it. If they are services you need, another deal without these conditions may be more suitable.

• Quality service

  Some providers may offer a service guarantee. Or you may have dealt with this provider before or know someone who has.

Tip Will the new financial institution help you make the switch? If you are switching transaction accounts your old and your new bank, building society or credit union will help re-establish your regular payment arrangements on your new accounts. They might even help meet the costs of closing an old account.

 

It may feel like you're comparing apples with oranges but the rewards are worth it so keep at it! Pay special attention to the overall costs and that includes any possible exit fees you'd pay to your current provider if you choose to switch.

There's often more incentive to switch if you can save a lot of money in the long run. Depending on what's most important though, you may be willing to pay more for a product that's more tailored to your needs from a provider you know will give you better service.

Ultimately, you're in the best position to decide whether you have something to gain by switching. If think you will, move on to the final step. If you decide you've got the best products for you at the moment, file your papers away and make a note in your diary to do this again in a year or so.

Step 4: Approach your providers and get a better deal

By this stage, you've done your homework and you know your stuff. It's time to talk to the providers.

With Steps 1, 2 and 3 under your belt, you're now in a good position to get a good deal. You're clear about what you want, what you have now and what the competitors are offering.

When you talk to providers, it pays to be prepared. Bring the paperwork. Write a list of product features you want to know more about. Write down the questions you want to ask.

Talk to your current provider as well as potential new ones. You may be offered a new deal on your current products if they want to keep you.

Financial institutions are working to make switching easier. If you decide to move to another provider, you can ask for help to make the switch easy and painless.

Find out more about getting the best deal on your mortgage by reading our article Switching Home Loans or more on switching bank accounts and how it is getting easier to make the switch by reading Switching Bank Accounts.