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Would you like a credit card with thatWilson Luna
Who doesn’t love a deal? And these days the banks are offering tons of them, cross-selling products and bundling services to entice customers in. But before you fall for the hard sell, you might want to get some independent financial advice … Would you like to supersize that? We’re all familiar with the phenomenon – fast food restaurants offering extra-extra-large portions of our favourite greasy treats at a price that seemed irresistible. We gobble it up (literally) … and only later when our waistlines and health start to suffer do we wonder if we really needed all those chips, even at a bargain price. The supersizing craze has prompted several successful books and documentaries – and pressure on restaurants to reduce their serving sizes and offer healthier options. So now we all know that supersizing is something to be wary of, right? Well – maybe when it comes to our calorie budget, but it seems that some financial institutions still think our money budgets are up for grabs as tellers are offered prizes and bonuses to meet weekly sales targets.According to a recent article, banks encourage staff to 'cross sell' products – such as offering a credit card when a savings account is opened. Different banks have different targets that need to be met, but let’s face it: they’re all interested in selling you their products. And if you don’t have your guard up that could mean taking on a whole lot of debts and accounts you don't need – especially in the run up to Christmas. We all know that for most of us, the financial situation isn’t great right now, and Australians already have almost $15 million credit and charge accounts, with a collective debt of over $49 billion. With more than $36 billion of that accruing interest, it's easy to see how people get stuck on the debt treadmill if they can't pay more than the minimum each month. The Wesley Report from October 2010 revealed that 57 per cent of people in NSW were worried about whether they could meet financial obligations in the future, up from 34 per cent in 2006 (1). So most of us need extra bank fees and higher credit limits about as much as we need a really big serving of greasy chips – even with attractive saving rates on prices, it’s just not worth it. It’s not exactly a surprise that financial institutions have sales targets, but it can be difficult to keep it in mind when a sales representative is doing a great job of selling their products and services. So to make sure you get everything you need and nothing you don’t, here are a few things you should remember. Do you really want it? In this sense shopping for financial services is no different from shopping in a retail outlet – price isn’t your only consideration when making a purchase. Something you need and want might be worth a bit of extra cash – something that’s just going to sit around adding charges to your bank statement isn’t. Packaged home loans are a big deal lately, but they’re only worthwhile if all those bells and whistles benefit you. A British study revealed that fewer than one in ten people were getting their money’s worth out of all the extra services – and we’re probably not much different. Whose side are they really on? Bank staff aren’t the enemy, and they’re not deliberately offering unnecessary services. But it’s their job to make their products sound fantastic – and it’s easy to get caught up in the enthusiasm of a good spiel and end up buying something you’ll regret later. Get independent financial advice before making any big decisions, because you need to hear from someone who works for you, not your bank, before you pick a product. Can you pay it off? With any bank product, it’s important to ask ‘What will this do for me?’ but it’s especially vital when it comes to taking on any new debt. If you’re looking into a home loan, do a ‘stress test’ before approaching your bank to ensure your budget can handle the new expense – and deal with potential interest rate rises. If your bank is offering to raise your credit limit, think about whether you really need it; remember you’re aiming for credit debt reduction here, not the temptation to spend more! Right now banks are hungry for customers, so that means there are some great deals out there. But the next time your financial institution offers you an added extra, just ask yourself – does my wallet really need that supersized serving of fees?
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Author's Biography |
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Wilson Luna is an author, wealth adviser and founder of Your Family Your Money. Your Family Your Money’s goal is to simplify traditionally complex financial strategies, demystify financial jargon and debunk common financial myths, becoming every family’s first stop for financial advice, information and inspiration. |
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