Here, we highlight 25 common money mistakes – and what they could end up costing you.
Going overdrawn without agreeing it with your bank first
Unauthorised overdraft charges can be sky-high, so don’t go into the red unless you have an agreed overdraft in place. According to research by moneysupermarket.com, going £500 overdrawn for 5 days without permission will cost £24.31 on average, so if you were to do this four times a year, costs could quickly mount up to nearly £100.
Exceeding your credit card limit
Always keep a regular eye on how much you owe on your credit card so that you avoid going over your limit. Remember that each time you exceed this limit, you will typically be charged £12.
Missing a monthly credit card payment
If you don’t make your credit card payments on time, you’ll be stung by a £12 charge every time you miss a payment. Set up a Direct Debit so that the money comes out of your account automatically and you don’t miss payment deadlines.
Not keeping track of your ISA savings rate
Using your individual savings account (ISA) allowance enables you to earn tax-free returns, but if you don’t keep a close eye on the rate of interest you’re earning you could be missing out on nearly £100 a year. For example, if you put the maximum £5,100 allowed last year into one of the top paying ISAs which paid a bonus for the first 12 months, but failed to move your money to one of the best accounts when the bonus period ended, you’d have missed out a potential £93 in interest.
Using a credit card to withdraw cash
You should avoid using your credit card to take out money at all costs, as interest rates on cash withdrawals are sky-high, usually between 25% and 29%. Cash withdrawals aren’t eligible for an interest-free period, so you’ll pay interest from the time you make your withdrawal. You’re also likely to be charged between 2.50% or 3% just for making a cash withdrawal, so stick to using your card for purchases only.
Not using ISA allowance
Millions of people fail to use their ISA allowance each year and therefore miss out on valuable tax-free interest. If you’re a basic rate taxpayer and you’d used your cash ISA allowance each year since ISAs were introduced rather than investing it in an account where returns are taxable, you’d have earned a massive £3,839.96 in extra interest.
Sticking with the same insurer year after year
Don’t fall into the trap of accepting your insurer’s renewal quote each year. Switching to a different insurer could save you hundreds of pounds. According to moneysupermarket.com, for example, the average saving achieved by shopping around for your car insurance alone is a massive £282 a year.
Not having breakdown cover
Breakdown cover can cost as little as around £30 a year, yet millions of motorists drive without it and risk facing a bill of £150 or more if they are stranded on the hard shoulder of the motorway and need to be towed home.
Not paying off store cards
Figures from Moneysupermarket.com show that a shopper making £500 worth of purchases on a Burtons, Homebase or Dorothy Perkins store card at 29.9% APR would be charged a hefty £74 in interest in 12 months, with average monthly repayments of £48, so always clear store card debts immediately.
Only making minimum payments on credit cards
Almost one in ten credit card holders admit they only pay off the minimum amount each month, despite the fact it means the total amount they pay back skyrockets. If you borrowed £1,000 at an annual percentage rate of 18.13% and only paid off the minimumeach month, it would take you 17 years to clear the debt. More shockingly, the amount of interest you would pay is £1,113 - meaning you end up paying back more than double the original sum borrowed.
Paying for a packaged account and not using the benefits
If you are shelling out each month for a packaged account, make the most of the benefits on offer. If you don’t use them, then chances are you’ll be wasting £120 or more on fees each year, so switch to an account which doesn’t come with perks and doesn’t impose a monthly fee.
Not reviewing direct debits (and cancelling old ones)
Checking through existing direct debits and making sure they are still valid and cancelling any unwanted payments may free up some cash so do this regularly or you could be chucking money down the drain unnecessarily.
Buying foreign currency at the airport
Leave your travel money until the last minute and you’ll lose money that you could have spent enjoying your holiday. Moneysupermarket.com figures show that buying foreign currency at the airport could cost you an extra £78.60 based on 1000 euros compared to if you bought it online in advance.
Not using a free ATM
Most banks enable you to withdraw cash free of charge if you use one of their machines, so there’s no excuse to take out money from a fee-charging ATM. These can hit you with charges of up to £2 a time - even if you are only taking out £10.
Paying in sterling when paying with a debit or credit card abroad
Cardholders are often offered the option to pay for goods and services in the currency of the country they are visiting, or in pounds sterling. But if you do opt to pay for a transaction in pounds in a foreign country, the retailer will apply their own conversion rate which will cost you a lot more. This is known as ‘dynamic currency conversion’ and to avoid it you should always ask that bills are left charged in the local currency.
Using a credit card for weekly living costs (groceries etc) if you don’t pay your bill off in full each month
Over 14 million Brits are using their credit cards to cover everyday costs, but this is a dangerous habit to get into, especially if you aren’t clearing your balance every month. Try to use your card for bigger purchases only.
Paying gas/electricity bills quarterly
Most energy suppliers offer discounts if you pay your bills monthly by direct debit – stick to paying them quarterly and it could add an extra £126.18 a year to your outgoings.
Not bundling services together
Keeping your home phone, television and internet services separate is usually much more expensive than bundling them together. The typical saving you can make from bundling is £150.
Sticking with the same energy supplier
According to moneysupermarket.com, across Britain, households who have never switched provider could save an impressive £265 a year on average if they moved from the incumbent provider's standard tariff and opted for the best value deal, so don’t stick with the same supplier unless you’ve checked there isn’t a better deal available elsewhere.
Not reviewing your mobile tariff
Millions of people are forking out up to £200 extra a year on mobile phone bills because they are on the wrong tariffs – so if you think you might be one of them, you should review your contract now. A report by research group Billmonitor found that consumers are throwing nearly £5 billion a year down the drain by signing up for the wrong contracts.
Choosing the wrong plastic to take abroad
Pack a credit or debit card that stings you with expensive foreign usage and cash withdrawal charges when you go on holiday and you could be looking at paying extra charges of around £50.
Not using discount vouchers
It’s possible to save hundreds of pounds on your shopping over the year by using discount vouchers, so every time you buy on the internet always check whether there is a code available which could get you some money off.
Failing to claim benefits you're entitled to
According to the Consumer Credit Counselling Service, families who fail to claim the benefits to which they are entitled are losing out on £80 a week, or nearly £4,000 a year per family. The total UK unclaimed benefits is a staggering £16 billion a year.
Missing tax return deadlines
If you are one of the nine million people who have to file a tax return, failing to get your form in on time is likely to prove costly. If you don’t submit your return online by January 31 each year, you’ll have to pay a £100 penalty – and if you haven’t got it in by July 31, HMRC will hit you with a further £100 fine, plus interest on any unpaid tax.
Travelling without insurance
Illness or accident, cancellation of flights, and lost baggage are just some of the things that go wrong when you’re on holiday, so travelling without cover could prove an extremely costly mistake. Cover can be bought for just a few pounds, so why take the risk of travelling without it?