As we get older, it can be very easy to stop thinking about how we manage our finances. “I’ve always done it this way and it’s always worked for me!” we may think. However, there are lots of advantages to taking a good look at the banking services that you use and thinking about whether they are still right for you. These include better interest rates, faster and more convenient access and less hassle.
The world of personal banking is a wide one and it’s easy to get lost in. But here at Lifeline24, we think there are a few key things that all older people should look at to improve their relationship with their finances. Here are our top banking tips for older people.
Don't be scared of online banking!
When you are used to visiting your local bank branch, online banking can seem confusing and intimidating. How do you know your money is secure? What if you forget your password? Is it possible to get locked out? These are all valid concerns.
Sadly, many bank branches are closing. It is no longer a given that your town centre will have a branch of your favourite bank. Bank opening hours are also being reduced as banks look to cut costs by moving their customers towards online. This can be a big problem for older people especially, who can find it more difficult to understand newer technologies.
But by and large banking is moving online. Not only that, but nowadays banking online is the easiest way to monitor and manage your finances. Online banking allows you to access details of your account, make payments and more, all from the comfort of your own home 24 hours a day, seven days a week. And it shouldn’t be difficult or cause worry.
There are plenty of advantages to using online banking. Here are some of our favourite features of banking online:
- Checking your balance – It’s easy to check your account balance on your phone or your computer using online banking. This allows you to have a solid understanding of how much money you have at any time, so you can budget effectively or know when you can afford to treat yourself!
- Moving money – Transferring money to a friend, setting up a direct debit, or paying a bill – these used to require a visit to a local bank branch but can now be done online while you sit on your sofa. Transferring money is particularly useful as we move towards a world where less and less people carry cash.
- Online alerts – Many online banking providers offer the very useful feature of text message and email alerts. An alert can be set-up, for example, to text or email you when your account balance is reaching a particular number, meaning that it is much easier to avoid accidentally going into the red. A survey carried out by Lloyds Bank found that 67% of people think banking online has helped them avoid overdraft fees.
- Paperless statements – Are you still receiving paper bank statements in the post that you then need to file and organise? Online statements are a common and helpful feature of banking online that allow you to see transactions and payments in detail, often going as far back as when you opened the account. Going paperless frees up space in your filing cabinet, is more secure and helps to save the environment!
Of course, there are still some things that you will need to visit a branch for: like cashing a cheque or turning your account into a joint account. But most of the everyday banking actions can now be completed online saving you the hassle.
Is online banking secure?
This is a big worry for older people getting into online banking, and rightly so. But be reassured that there are processes and systems in place that make online banking much more secure than you might think. These include:
- Timed sessions where you will automatically be logged out of the system after being inactive for a period of time (perhaps five minutes).
- Authentication processes that use a combination of passwords and characters from a piece of “memorable information” to ensure that even if someone else knew your password, they still wouldn’t be able to get into your account.
- The latest online encryption security protocols such as SSL and TLS.
Banks have invested lots of time and money to ensure that their systems are very secure, and although there a have been some recent examples of banks failing to live up to standards, these are thankfully the exception and not the rule.
Unfortunately, as hard as banks and the Government try, there are still several methods that scammers can use to target and exploit older people. It can be very difficult to spot a scam because of the clever and convincing ways that fraudsters go about them, but by understanding some of the common types of scams you can be more prepared and better protected.
Types of scams and how to avoid them
There are plenty of different types of scam. Here are some of the most common ways in which people have been scammed in recent years:
- Telephone scams – This is probably form of scam that you are most likely to encounter as an older person. Telephone scammers will call a person pretending they are someone from their bank. They will sound highly convincing and official and will let you know that they think there is a problem with your account. To fix it they will suggest that you give them your personal details and/or your bank login details, which they will then use to empty your account into theirs. Your bank will never call you and ask for personal details so if you find yourself in this situation it is very likely that you are dealing with a scammer.
- Online payment scams – There are several types of scams that involve online payments and although these are less common than they used to be, they are still a problem. One type is where an online shop will have an unbeatable deal on a product – but they are not really a shop and there is no product. When you go to put your payment through it will go directly to the fraudsters. There are a few things you can do here: check the address of the seller to see if it looks legitimate, check for the secure “padlock” image in the URL bar of your browser and search the company online to see if you can find independent reviews.
- Online banking detail scams – These are similar to telephone scams but may instead include scammers sending a text message or email (also known as “phishing”) asking you to verify your online banking details pretending that they are your bank. Remember that your bank will never ask you for these details, so you should be very sceptical of these requests.
Don't be Afraid of Switching Banks to get the Best Deal
It is easy to get comfortable using a bank that you’ve have been banking with for decades, but you can save or even make money by switching! The personal banking market is more competitive that ever and banks are willing to pay you cold, hard cash, and lots of other benefits, to get you to switch to them. Switching banks might seem like a daunting task but it’s never been easier since ‘seven day switching’ was introduced in 2013 and in some cases you can get up to £200 once you are switched over.
Do your research when it comes to switching and make sure that you are getting the best deal possible. A helpful resource is MoneySavingExpert that has a regularly updated guide to the best banking deals currently available. Remember that if you do not keep a regular eye on your interest rates, benefits and banking features, you may not be getting all you can out of your banking.
Bank Account Breakdown
There are several different terms and names used for different types of bank accounts. Here are the most common styles of account and what they are best used for:
Current accounts are used for everyday transactions. These are usually the accounts that you use the most - the one where you set up direct debits, pay for your shopping and perhaps even use an overdraft. These can be managed easily through online banking and allow you to withdraw cash and make payments with a debit card.
Savings accounts come in a few different varieties which include:
- Easy Access Savings Accounts – These accounts are set-up so that you can easily withdraw money whenever you like. These are ideal if you would like to save but would like the option of withdrawing money whenever you need it. The downside of these accounts is that they will usually have a lower interest rate.
- Fixed Term Savings Accounts – These are accounts where you can trade ease of access for a higher interest rate. In other words, your money will be locked away for a period of time (usually between one and five years) but you will earn more interest compared to an easy access account.
- ISA – An ISA is any savings account where the interest that you earn on the money within it isn’t taxed. The tax-free benefit applies every year that you have the account open, but everyone has a yearly ISA allowance – for 2018 it’s £20,000. More of a tax-free wrapper than a specific account, ISAs are often very good for people with a lot of savings but recent changes to the personal savings allowance (PSA) have meant that they are now less valuable to people who are saving less money.
- Premium Bonds – Premium Bonds are an investment process where instead of earning interest on your money, you are entered into a prize draw. You will need to commit to putting £50 regularly or invest at least £100 and doing so will enter you into a prize draw where the winnings are between £25 and £1,000,000.
One thing to remember is that in recent years current accounts have been very competitive in terms of their interest rates, often outperforming savings accounts from the same bank, so check those too!
A credit card essentially allows you to borrow money from the bank and pay it off when you can with interest. Not everyone is eligible for a credit card, it will depend on your credit rating. Your credit card limit (how much you can spend/borrow) will be based on your credit rating history. Paying off credit cards usually work in a way where if you pay off the minimum balance within a month then there will be no interest added.
Having a credit card can be extremely helpful if you need to pay for something suddenly or have a holiday that you need to book. For example, if you're washing machine breaks suddenly you can pay for the repairs on your credit card and pay the balance back at the end of the month.
Credit cards also come with added security thanks to Section 75 of the Consumer Credit Act. This states that if a something costs between £100 and £30,000, and is either faulty or the company you bought the item from goes bust, you can easily get your money back from the card issuer.
If you are unable to clear the debt in full each month, the good news is that you can spread the payments over time. However, this means you will start to pay interest, and when you realise the typical rate is around 18% APR, it isn’t going to be cheap if you have a large balance on the card.
Other dangers to credit cards include that there are penalty fees for late or missed payments, which can build up and place you in serious debt. It's important that you are sensible when using your credit card to avoid any of this.
Know your Finances
We hope that this guide has opened your eyes to the world of banking. It may seem scary at first but going online with your accounts can make life so much easier for you. You can transfer money and make payments from the comfort of your sofa, rather than having to go into town and queue for ages. Reading our articles on online scams and telephone scams will put you the best position to avoid becoming a victim.
Being accustomed to all of the accounts and offers will also allow to get the most from your accounts. Remember to keep an eye on the special deals that banks ore offering to new customers. For more advice on your finances you can see our top 10 tips for older people.
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