Personal Finance with Charlie Weston

Charlie Weston is the personal finance editor of the Irish Independent where he writes stories on money matters almost every day, and edits a Your Money section which appears every Tuesday. Charlie is an award-winning journalist and very much on the side of the consumer. He is married with two young daughters and supports Liverpool, for his troubles. He can be heard on The Last Word with Matt Cooper show at 4.50pm every Wednesday.

If you have a query or question you'd like to ask Charlie, simply send it into lastwordfinance@todayfm.com.

Cut up the card

10/03/2010 16:14:30

We owe €2.9bn on 2.17 million personal credit cards. Consumers have been desperately trying to reduce this debt mountain. Payments on credit cards have been greater than the amount spent on them in 10 of the last 12 months. New spending on cards in January was the lowest since April 2005. Consumers paid down €83m more than they spent on cards in January.
The average credit card debt is €1,200. But the Money Advice and Budgeting Service (MABS) reports its clients owing €8,000 on average on credit cards.

Don’t pay the minimum
Households in financial difficulties have been found to be three times more likely to be only paying the minimum (which can be as low as 1% with MBNA) on their card each month, according to the Law Reform Commission.
It will take 20 years to clear a €8,000 debt if you pay just 2.5% of the outstanding balance every month. In that time you will have paid €6,000 in interest alone.

Switch card
Tesco will give you 0% on balances transfers for six months and on purchases in Tesco. (Typical annual percentage rate (APR) of 14.9%).
MBNA offers 0% for 10 months, but this card issuers has recently admitted overcharging customers by €18m, is aggressive when people are in arrears and can charge interest for two months if you are one month behind in payments.
EBS member card also offers 0% on balance transfers for 10 months.

Get the interest frozen
If are heavily indebted it is possible to have the interest and penalty charges frozen on your card.
Credit card companies don’t admit this, but if you are heavily in arrears they will agree to freeze the interest and penalties.

The best rate on purchases
AIB’s Click card (an interest only account) has the lowest rate on purchases of 8.5%. But the rate for cash withdrawals is 23.4%.
Bank of Ireland’s Clear card has a rate of 9.5%, with cash withdrawals charged at 19.9%.

Clear you card debt
Get a personal loan (rates average at around 11%) or a credit union loan (average rates of around 7% to 8%) and clear the debt.
Cut up the card.

Get a prepaid card
If you need make online purchases then get a prepaid or disposable credit card. You do not need to have you credit history checked to get one of these.
Get a 3v disposable card. You register online then take the card to a retailer, hand over the cash and the card is loaded up. You get a 16-digit visa number. It is free to load up to €20 on the card, then €2.5 for between €30 and €100, and €5 for between €110 and €350. 300,000 people have registered for 3v cards.
Or, get a prepaid Mastercard from www.neteller.com. The physical version of this card can be used to book Ryanair flights without incurring the €5 “administration charge” per flight.
You need to register online, then send off a colour photocopy of your passport and a utility bill. Once registered and “authenticated” you can then load the card online from you bank account. There is no charge for this. If you load the card from a credit or debit card there is a 1.75% charge per transaction.

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mattc
Motor Loans

10/03/2010 16:09:58

SALES of new cars are up 12% on last year, according to the Society of the Irish Motor Industry (SIMI). Mind you, last year was the worst on record for car sales. There are some signs that car loans are getting a little easier to come by but banks are still not eager to fund motor deals.

Fewer dealerships
Around 100 dealership shut down last year as the motor market went into freefall. Last year just 57,000 new cars were sold. This is down from 186,000 in 2007. It is expected that between 65,000 and 70,000 cares will be sold this year.

Banks are not lending
Lack of finance was one of the main reasons people did not buy cars. Halifax/Bank of Scotland, Lombard Finance, Friends First and GE Money have all pulled out of the car finance market in the last year.
AIB, Bank of Ireland and Permanent TSB are the main banks left in the car finance market. But Volkswagen Bank, Ford Finance, Toyota Finance and Renault Finance have stepped in to try fill the breach. Some of these rates are very competitive and are as low as 5.9%.

Credit unions are cheaper
But some of the cheapest deals are from credit unions. The average credit union loan rate is 7% compared with an average of 11% for five of the leading banks, a survey carried out by the Irish Independent and the Irish League of Credit Unions has shown. Credit unions are reporting a surge in business coming to them from people who have been turned down for credit by the mainstream banks.
Almost a third of all car buyers secure a loan from their credit union, making it one of the most significant sources of motor lending. A survey of bank lending rates showed that for a €10,000 personal loan over five years the interest rate varies from 10.5% charged by Ulster Bank, to 11.47% for National Irish Bank’s variable personal loan.

Avoid hire purchase
Bank of Ireland is making anyone who needs to borrow more than €7,000 for a car take out a hire purchase agreement. With hire purchase you do not own the car until the last payment is made, you can have it repossessed if you miss payments and there are a range of fees and charges.

Scrappage deals
Some dealers are topping up the Government’s €1,500 scrappage offer with up to another €3,000.

TIP:
Check there is no money owed on a second-hand car before buying – telephone hire purchase information on 01-2600805.

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mattc
Charlie answers some of your questions...

19/02/2010 16:43:49

Switching your mortgage
Hi Charlie,
Can you advise us whether there would be any issue in trying to switch our home mortgage (roughly €200,000) from one provider to another, given that we have taken out a top-up loan on this mortgage about three years ago (a separate mortgage agreement for €50,000).
We have the main mortgage now with the same bank for nine years. It was taken out for 30 years. It is currently a standard variable mortgage.
Both my wife and I work in the public service.
Can you provide examples of financial institutions which are offering good rates and which might cover include legal fees for switching.
Thank you in advance.
Kevin

Charlie says:
Some points worth noting:
1. Make sure if you have a tracker that you are not going to give it up.
2. Figure out the loan to value (LTV) on the property. If the LTV is still very high, then options for switching are limited. The best deals in the market are where the LTV is low.
3. Decide if you want a fixed or a variable rate home loan. If a variable, then you are at a severe risk of mortgage repayments rising significantly. Maybe look at a fixed rate to guarantee more stable repayments.

The best deals in the market are from some of the banks that have become less keen on offering switcher mortgages to new customers so you need to do your homework on this one. For example, Bank of Ireland and AIB are less keen now on switcher business but have excellent rates, Frank Conway of Irish Mortgage Corporation points out.

The best deals in the market are generally for new customers. Moving from an existing provider may be best option in some cases.

KBC Homeloans offers an inclusive package for legal fees but the interest rate in much higher, exceeding 4% so may be better value going with their non-legal fee deal, where interest rate 2.45%.

Children's Bank Accounts

Charlie,
I have a 20-month-old daughter and another baby due the end of April. I would like to set up savings accounts for both of them and wondered whether you would recommend a particular bank or would I be better off going for a post office or credit union account?

Denise

Charlie says:
I have two girls (9 and 6) and I have two AIB Parent Saver accounts. These accounts pay 5pc, but for a year only and there is a €200 monthly maximum you can put into each. After a year the money is transferred into a parent deposit account paying 0.5pc. The banks know that inertia will earn them money, in that most of us (me included) will be too lazy to take our money out of the likes of the parent deposit account and put it somewhere where you will get a better return.
Other good regular savings accounts include the EBS Building Society one which pays 4pc with a monthly maximum of €1,000, and Permanent TSB’s one which pays 3.75pc and has the same monthly maximum.
Each credit union has a different rate (they are all run independently) so you need to check your one out.
An Post’s Childcare Savings account pays just 1pc.
But it also has a Childcare Plus account. This is a long-term account where you are encouraged to lodge the child benefit monthly payment from the State. You put a maximum of €12,000 into it each year and you are guaranteed 20pc interest tax free if you leave it in the account for five years.
Apart from the Childcare Plus account, all the other savings products mentioned above are subject to DIRT (deposit interest retention tax) at 25pc.

Consolodating your loans

Charlie,

I have a query regarding our mortgage that I hope you may be able to advise me on. We currently have a variable rate 3.69% mortgage with Permanent TSB.
We would like remortgage while consolidating all our other loans i.e. car, bank and credit card.
The current balance of our mortgage is €177,400 and 22 years is the remaining term.
I contacted morgages.ie they recommend we remortgage with KBC home loans as our criteria does not suit AIB or BOI.
Any advise on this matter Charlie would be greatly appreciated.
Kind regards and thanks
Paul

Charlie says:
The question here is how much equity is in the property, (I know you probably know this, but equity is the difference between the current market value of the property and the current outstanding balance on the mortgage). This will determine whether switching and consolidating is possible.
KBC Homeloan's maximum loan to value is 80% so it are probably the best fit for you. KBC offers a competitive standard variable rate at 2.45% so you should be able to save a little money.
KBC will also allow debt consolidation and what most mortgage experts recommend is that you split the loan, where the short-term debts are paid over a matching term to ensure you get the best value for money, according to Frank Conway of Irish Mortgage Corporation. In other words, a five-year loan being consolidated into a new mortgage should be paid off over five years, and not the 22 years left on your mortgage.
You should also note that standard variable rates pose personal budgeting risks if and when interest rates increase.
Of course, this is a constant with all lenders but consumers need to remain cognoscente of the risks. Fixing is also an option.

Visa Electron

Charlie,

Is it possible to obtain a visa Electron card in Ireland. I notice on Ryanair they charge for using the normal visa cards. I am wondering if there is a way around paying this charge.
Noel

Charlie says:
I got a Visa electron card (a sort of disposable charge card) by registering and opening an account with www.entropay.com and filling out my details.
However, a Visa electron card is of no use to you any more because since January Ryanair has been imposing an “administration charge” of €5 on the Visa electron card as well as on credit cards. Ryanair has now decided to accept the prepaid Mastercard debit card without imposing the administration charges. It also keeps obscure way of getting flights without the admin charge so it does not have to mention the admin charges in its adverts.
However, what you save in credit card charges you could lose to the Mastercard. One of the main issuers of this card is Payzone, which supplies it to retailers in around 500 shops nationwide. But it cost €6 to buy the card and a user pays €3.50 to load up to €350 on it. Also, there is a 2.95pc commission for purchases.

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mattc
Boost your income

17/02/2010 15:57:15
We are all feeling the financial squeeze – from three savage Budgets, the Finance bill and job losses and pay cuts.

Last week’s Finance Bill will mean higher gas, heating oil, local authority and toll charges. But it is not all hopeless. Here are some ways cash-strapped consumers can boost their income.

Rent out a room
If you have the space, you can earn up to €10,000 a year without paying a cent in tax. Nor do you have to register with the Private Residential Tenancies Board as a landlord. Advertise your spare room on daft.ie. But do draw up a written agreement for your tenant.

Rent a parking space
If you live in an urban area parking spaces can be quite valuable. You could earn up to €200 a month. Undercut the “pay and display” rates. In rural areas, if you have spare land, you can rent out storage/parking facility. Advertise on a supermarket notice board.

Host a foreign student
Your spare room could earn money for you by accommodating a foreign student. You can earn up to €450 a week. Students stay from one to three weeks, and it is not just during the summer. Language Travel Ireland organise student visits to this country.

Work as a movie extra
This is where you make up a crowd scene with a non-speaking part. It costs €89 to register with the likes of MovieExtras.ie. Jobs likely to be in Dublin and Wicklow.

Be a mystery shopper
Mystery shoppers pose as regular customers to get information on the standard of products and services. Crest Ireland accepts online applications. Also try Recruitireland.com, according to research by the Consumers’ Association.

Other ways to boost your income:
- Sell unwanted items on eBay and Amazon and earn extra money.
- Alternatively, couples can child-mind. You can mind up to three children and as long as you earn no more than €15,000 a year you are not liable for any tax.
- Take a second job, if you can find one. The advantage of working unsocial hours or nights is that they tend to pay more. Check in your local pub to see if they need extra bar staff. Tips usually make up for a lower wage.
- Buy a more economical car. You could save yourself almost €900 a year by driving a more economical car. If you drive 18,000 miles per year and your car averages 25 miles per gallon, it will cost €3,096 (assuming 95 cent per gallon). A car that averages 35 miles per gallon costs just €2,211. The savings will pay for your road tax and insurance in 2010.
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mattc
Tackling debts – in three easy steps

03/02/2010 17:20:38
Households owe a mountain of debt - €171.5bn to be exact, according to the Central Bank. Some €150bn of this is owed on residential mortgages, with around €2.9bn owed on personal credit cards.
More and more people are struggling to meet their repayments, with many people getting into arrears.
Many people who get into arrears on their mortgage or credit card are tempted to ignore the problem. Instead, you should take immediate action.

1. LIST YOUR DEBTS

Make a list of all your debts. List the most important debts first – mortgage or rent, followed by electricity and gas. These bills have to be paid first. Never pay your credit card bill if it means you can’t pay you ESB bill.
Separately list your other debts – credit cards, overdrafts, personal or motor loans and set them out with the most expensive first. Pay the ones with the highest interest rate first.

2. MAKE OUT A NEW BUDGET

Work out how much you have and what you can afford to pay each lender. Check if you are entitled to Mortgage Interest Supplement, mortgage tax relief or Family Income Supplement.

3. CONTACT YOUR LENDERS

Contact your lender as soon as possible. Have all your facts and figures to hand, including how much you owe.

Do the following:
- Make an offer to your lenders. Contact your lenders by letters, and not by phone.
- Know what you can afford and do not agree to pay more on the phone.
- Be honest and open. Stay calm and never be aggressive.
- Get anything you have agreed on in writing.
- Assure them that if your situation changes you will revise the your situation with them.
- If they refuse to negotiate ask for someone senior.
Remember, some 30,000 people have successfully re-negotiated their mortgage deals with banks and building societies, according to the Irish Banking Federation.
For more information see www.mabs.ie, and www.itsyourmoney.ie.

You can email Charlie Weston at lastwordfinance@todayfm.com.
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mattc
Watch Out - mis-selling about

27/01/2010 17:53:32
Banks, insurance companies and brokers are “cold calling” people at the moment offering them a free financial review.
But be wary. What they are really at is trying to push protection polices, like life insurance, on consumers.Do not become a victim of insurance mis-selling.
Sales of mortgages, pensions and investments products have collapsed. As a result, the emphasis has now switched to pushing products such as life insurance, serious-illness cover and income protection.

I have received two cold calls – one from a from a life company I have never dealt with - suggesting that a representative sit down and do a review of my finances. But as soon I told them what I do for a day job, the phone call ended.
Now, why is it that the man from the life company who rang my home did not want to go ahead and arrange the appointment once he learned that I wrote about personal finance?
- Be aware that in a recession sales of these types of protection policies traditionally rocket as consumers become much more risk-adverse.
- If you do agree to a request from your bank, life company or broker to sit down and discuss your finances, make sure you do not end up being sold something you do not really need.
- Because those who sell protection policies are adept at playing on your fears and they sometimes use scare tactics to get you to sign up for additional and unnecessary cover.
The basic policies you need are motor, home and life cover.
If you have a mortgage, you will have been required by the lender to take out mortgage-protection insurance, so that ticks the life-cover box.
Note that you may also have life protection and/or income protection as part of your company pension – many people have.
Also note, that credit unions offer some of the best rates on life insurance, if you need that, through a mutual company called CUNA Life.
During the boom many people were sold inappropriate life products. Check that the cover you have is what you need and that you are not paying too much.
For more information, see the Regulator’s website, at www.itsyourmoney.ie, under ‘Planning for the future’.
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mattc
Overdrafts: high enough to make you weep

27/01/2010 17:30:10

Overdraft rates are second only to credit card interest rates when it comes to bad value in banking. We have some of the highest overdraft rates in Europe.
A recent survey, commissioned by the European Commission, found that Irish current accounts are less transparent than the European average, with more complex pricing structures.

Rates
AIB has the highest overdraft rate at 14.79%, according to the Financial Regulator. That is almost 15 times the European Central Bank rate. BoI – 13.7%; Ulster – 13.55%, Permanent TSB – 13.6%.

Surcharge rate
But it gets worse because if you go overdraft without having an overdraft facility in place there is an additional surcharge. AIB has a surcharge of 9%. This means an unauthorised overdraft with AIB will cost a whopping 14.79% + 12% or almost 27%. You would get a better rate off a moneylender.
So, if you had an unauthorised overdraft of €5,000 with AIB for a year it cost you €1,350 in interest alone.

Set up fee
To set up an authorised overdraft with AIB will cost you €25.39 initially, with the charge recurring every year. In contrast, Halifax has a zero set up fee.

Referral item
Any debit or cheques that cause an account to exceed its approved limit is/are subject to a referral item fee, per item.
Most banks charge €4.44 each time you don't have enough money in your account to cover a cheque.
Bank of Ireland does not charge a referral item fee but it will charge you €12.70 for a bounced cheque.
Postbank has not referral item fee.

Solutions/tips
Get a term loan or a credit union loan. Term loan for €20,000 – AIB 10%, Ulster 9.9%. Typical credit union loan between 6% and 12%
Alternatively, pay your bills directly. An Post BillPay allows you to pay 120 different types of bills in 1,200 post offices.
Internet current accounts are cheaper than traditional current accounts.
For more information see the Financial Regulator’s website, www.itsyourmoney.ie.

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mattc
Claim back your taxes

27/01/2010 17:27:00

Some 800,000 workers claimed a tax refunds totalling €580m from the Revenue Commissioners in the first 10 months of last year alone.
Here are some items you should claim:

Medical expenses
You can get 20pc of the money you spent on health expenses last year and 20pc of your spending on medical expenses this year.
This only applies to medical expenses that have not been reimbursed by a private health insurer.
Medical expenses include GP costs, drugs and medicines, hearing aids, home nursing and maternity care, among others.
If you are claiming medical expenses for 2008, and you are a higher rate taxpayer, your claim should be granted at 41pc.
Expenses last year of €400, will generate €80 in a cheque from the taxman.
Download a form called Med 1 from www.revenue.ie,

Service charges
Income tax relief is available for individuals who pay local authority and other service charges. Relief is given for service charges paid in full and on time in the previous calendar year.
The total that can be claimed for service charges is €400. This is given at the standard 20pc rate of tax. So if you paid €300 last year you will get €60.

Rent a room
Where a room in a person’s main residence is let as residential accommodation, gross annual rental income of up to €10,000 in 2008 and 2009 is exempt from tax.

Trade unions
Tax relief is available at the standard rate on subscriptions paid to trade unions up to a maximum of €350, which means a tax credit of €70 for someone who pays this much.

Home carer’s credit
The home carer's credit of €900 may be claimed by a married couple where the husband or wife cares for one or more dependent children, and where they are jointly assessed.
A tax credit has the effect of reducing your payable tax by the amount of the credit.
If the home carer earns an income of less than €5,080 they can still claim the full credit. If they have income between €5,080 and €6,880 - reduced credit.
The tax credit is not available to married couples who are taxed as single persons.
Neither is the tax credit available to married couples with combined incomes over €45,400 in the tax year 2009 and who claim the increased standard rate tax band for dual income couples.

Tuition fees
Tax relief at the standard rate of tax (20pc) in the tax years 2008 and 2009 is available for certain tuition fees.
The maximum limit on such qualifying fees for the academic years 2008/2009 and 2009/2010 is €5,000.

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mattc

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