The Drudgery Of Having To Switch For A Better Deal

This is a guest post by Sara Williams, who writes about debt and credit ratings at Debt Camel.

Have you heard the saying that loyalty is great for labradors and your best friends – but it can wreck your finances?

Citizens Advice says eight out of ten people are paying higher bills for remaining with their existing supplier than if they switched.

This “loyalty penalty” covers a huge range of products:

• you find your savings are actually getting no or almost no interest, because the good looking interest that made you open the account it was only for a year;
• your car or house insurance renewal has gone up – but you could pay less from exactly the same firm if you were a new customer;
• your mobile contract ended and you are still paying the same amount each month, even though the handset has been paid off;
• your broadband is good but the price keeps on rising;
• the energy supplier you switched to 18 months ago has hiked its price five times in the last year;
• your fixed price mortgage ended and the lender didn’t tell you that you could save a lot with a new fix.

etc etc

So you just switch, don’t you?

Of course you can switch to a new deal. It often isn’t that hard. Jenni has just written about how easy it is to switch energy supplier.

And my top tip is that if you have a mortgage where the fixed rate has ended or will soon, switching to a new fixed rate deal should be your top priority as it could save you £500, £1000 or more a year.

For some customers this is very hard

Millions of older customers are barred from many of the best deals because they don’t use the internet at all. Even pensioners that do use the internet may prefer to stay with a big name supplier “that they trust” rather than switch to someone they haven’t heard of. Even though that firm they trust has been ripping them off for years.

Things like mobile deals and overdraft charges can seem deliberately complicated to stop them being to compare.

This “confusion pricing” is hard for everyone but impossible if you aren’t good with numbers, have mental health problems, or you are sleep-deprived with a new baby. It’s easier to just carry on than to have to make a hard decision that could turn out to be wrong.

And for everyone this adds up to a whole lot of work

You could have more than a dozen different products to be checked every year: mobile, car insurance, contents insurance, travel insurance, pet insurance, boiler cover, gas and electricity, broadband, Sky/cable/TV packages; bank account, savings account, ISA, mortgage etc

That is drudgery. It’s very easy to let a few of these slip and not even realise what a poor deal you are now getting.

Perhaps the car renewal notice came through when you were going on holiday, unwell or just really busy at work. You just let it automatically renew and then you are stuck paying that for the next year,

Getting a reasonable deal; not the best

A few people gain a lot from being super-switchers.

But for the rest of us, I think many people would be happy to settle for an OK deal, not the absolute best, if they meant that they wouldn’t end up on a rubbish one a year or two later.

Last year Citizens Advice put in a “super complaint” to the Competition and Markets Authority (CMA) about the loyalty penalty rip-off. It’s not just savings accounts or insurance, it’s a much wider problem. Competition between suppliers is good if it results in lower prices and better products. But at the moment too many people are paying a too high a price for being a loyal customer.

The CMA agreed this is a big problem. Its Chief Executive said in December:

Our work has uncovered a range of problems which leave people feeling ripped off, let down and frustrated. They shouldn’t have to be constantly ‘on guard’, spending hours searching for or negotiating a good deal, to avoid being trapped into bad value contracts or falling victim to stealth price rises.

Good words! I hope they translate into positive action in 2019.

But in the meanwhile… what is your top priority to look at and switch?