Sarah Pennells is a personal finance journalist and the face behind SavvyWoman.co.uk. We think she does a great job at explaining financial subjects in a very clear and accessible manner. You can find her column below where she writes about the latest financial news, and helps you get more from your money.
What does the Brexit vote mean for your money?
There’s only really one finance story at the moment, and that’s what the Brexit vote means for our money. With so much uncertainty it’s hard to be definite about this, but here are my tips on what could happen and what you can do if you’re going to be affected:
The cost of holidays abroad will rise. The pound has fallen sharply – reaching a 31 year low against the dollar at one point, although it’s since recovered. If you’re going abroad, that means your pound will buy fewer euros, dollars etc. As I write this, the best euro exchange rate is approximately €1.18 to the pound, but some airport bureaux de change are changing money at €1.05 or below. If you’re off to the United States, the best buy results are $1.30, but you could get less than $1.15 if you exchange at the airport.
SAVVY TIP: It sounds obvious, but make sure you shop around for the best deal when you’re buying currency. There’s a big difference between the best buys and airport rates. Some foreign currency providers let you order in advance and pick up at the airport, while others will deliver. You’ll probably have to pay a delivery charge if you’re ordering less than £400-£500.
House prices could fall. I’ve spoken to mortgage brokers, sellers and estate agents who say that appointments have been cancelled and buyers have pulled out or dropped their offer at the last minute. If you’re looking to buy, Brexit may mean property prices come down. What we don’t know is how much they’ll come down by and how different parts of the UK will be affected.
Pensions may fall, but don’t panic. If you are in a final salary pension through your workplace, it’s up to the pension scheme to make sure there’s enough money to pay you. If the worst happens and the pension scheme has to close because there isn’t enough money, you’re protected by a safety net as long as your pension isn’t more than around £37,000 a year (that’s far more than most people retire on).
If you’re in a pension where the amount you’ll get at retirement depends on how well your investments have done, any fall in the stock market will have an effect. But, unless you’re about to retire it isn’t a big deal if the price of shares recovers in the near(ish) future. It’s only if the stock market spends years in the doldrums that it could be a worry.
Investments: If you have money invested (maybe through something like a stocks and shares ISA), it’s time to ignore the news and ups and downs of the stock market and sit tight. Some investors used the falls in the FTSE100 index on Friday as an opportunity to buy more shares (think of it as a ‘flash sale’, but without the adverts…!). The worst thing to do is to cash in your investments as that’s a sure-fire way to lose money.
Consumer rights: While we’re still members of the EU, the laws and regulations will stay the same. A number of our UK laws had their origins in the EU and EU rules govern things like limits on how much mobile phone companies can charge for calls made while we’re in the EU and compensation for delayed flights.
The credit card is 50 years old
It’s happy 50th birthday to the credit card. In June 1966 Barclaycard sent out over a million credit cards to Barclays Bank customers and, while some people returned them or threw them away, others embraced the flexibility of paying with plastic.
It made the biggest difference to women who had previously often had to get a man (husband or father) to sign an application for a loan or credit (Grr..don’t get me started on that one!).
The Barclaycard that was available in 1966 was quite different from credit cards that are around today. Then, the most you could borrow was £100 and it had to be paid off in full within a month – in the way that charge cards work today.
So, are credit cards a good or bad idea? If you use them well, they’re a great product, but if they encourage you to spend money you can’t repay, they can lead to serious debt problems. Here are six things you should bear in mind if you want to get a credit card:
Credit cards give you great consumer protection if you buy something costing between £100 and £30,000. The law says that the credit card company is equally liable (so can be made to give you a refund), if you buy something and the company goes bust, isn’t accurate or honest in describing what you’re buying or doesn’t deliver it (and doesn’t offer a replacement).
Having a credit card can improve your credit rating. If you’re applying for a mortgage and you don’t have any forms of credit (such as a loan, contract phone etc), getting a credit card can boost your credit score. You don’t have to spend more – you can put an existing regular payment through your credit card and clear the debt in full each month.
Balance transfer deals can be competitive. If you have a balance you can’t pay off, you can get deals offering you 0% credit on balances for up to three years. They may be interest free, but they’re not fee free as you normally have to pay between 0.5% and 2% of the amount you transfer as a fee.
Credit cards can be an expensive way of shopping if you don’t pay them off. Most credit cards charge between 15.9% and 19.9% on purchases.
If you make the minimum payment, it could take you decades (really!) to clear your debt as most of your payment will be used to pay off the interest, rather than the amount you owe.
Never take cash out on your credit card. If you do, you’ll be charged interest on day one (even if you pay off the debt in full) and the cash advance interest rate is normally a lot higher than the amount you’re charged on purchases.
You’ll only get the best deals on credit cards if you have a good credit rating. Your credit rating influences not only how much you’ll be able to borrow on your credit card but also the interest rate you’ll be charged.