Ten things to ditch this New Year

New YearLewis Whyld/PA Wire

With the New Year done and dusted, now is the perfect time to kick your financial bad habits and the products that are stopping you live a financially healthy life.

Here are ten suggestions of what to ditch right away to get financially fit for 2013.
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1. Rubbish savings accounts

When was the last time you checked how much interest your savings were earning? You'd be surprised at how paltry the rates on your accounts may have become over the years.

Some easy access accounts, for example, come with an attractive rate to lure savers in, but are artificially inflated by a temporary bonus that typically lasts around 12 months. So the best buy rate you secured a year or more ago has more than likely dropped off.

This New Year give your savings a new start and review all of your savings accounts to find out exactly what you're pots are earning and if this can be beaten elsewhere. Ditch accounts that aren't working for your savings and find better ones using our savings comparison centre.

2. Overpriced packaged accounts

With a packaged account you pay a premium every month for a bundle of extra benefits like travel insurance, ID protection insurance, home emergency cover, breakdown cover, mobile phone insurance or a fee-free overdraft facility.

One in five UK adults has a packaged account, but in most cases when you weigh up the benefits with the costs the figures don't really stack up.

These accounts typically cost between £10 and £20 a month but the raft of insurances are often unsuitable and many people are paying for protection they already have or could get cheaper in a standalone policy. To see a breakdown of the costs read: Packaged accounts: is your current account worth paying for?

New rules should make the true benefits of these accounts clearer but personally I think packaged accounts are a bit of a con and free current accounts make more sense especially since they can come with perks too. The fee-free Halifax Reward Current Account, for example, pays you £5 a month as long as you deposit £1,000 each month, giving you an extra £60 a year!

3. Useless insurance

You have to be on your guard against useless types of insurance. It feels like someone is always trying to sell you protection you don't need or already have.

ID protection insurance is a perfect example. The credit and debit card protection really isn't necessary as you're covered by your bank when you become a victim of fraud. Just last month we reported that CPP was fined £10.5 million for mis-selling credit card insurance leading many to speculate that this form of protection could face a scandal as big as PPI.

Another useless policy for many is mobile phone insurance. That's because home contents insurance plans can usually be extended to cover the eventuality of your phone getting nicked, lost or damaged even when you are away from home. There's no point paying more for a standalone policy.

This New Year look at all the insurance premiums you are paying out and see if some policies overlap or are just plain useless. Streamlining the amount you pay out in insurance premiums can help you save loads in 2013.

4. Unrewarding cards

I have had the same HSBC MasterCard credit card for six years and it stopped being rewarding a long time ago.

Instead of using this credit card I could be earning points to spend on flights with the British Airways American Express Credit Card, earning cashback with the Santander 123 Credit Card, enjoying an interest free period on purchases with Tesco Clubcard Credit Card or on balance transfers with the Barclaycard 24-Month Platinum Visa.

If you like me are not getting the most from your plastic anymore it might be time for a change.

5. Paying for help

There are so many services that we fall into the trap of paying for that we could get for free.
Paying a claims management firm to help administer your PPI claim, for example, is a waste of money. You can do it yourself and save paying out over a quarter of what you win back. See How to claim your PPI compensation if you need help getting started.

The same goes for debt management companies that charge a fee. If you've got lots of debts that you need help managing, the last thing you want to do is pay for the help you get. There are a number of places where you can get debt advice for free.

6. Complicated finance management

Keeping on top of your finances is important if you want to get the most from your money. So this New Year it might be time to make managing your various accounts easier with Lovemoney's own streamlined organisational tool MoneyTrack.

It's a free service that aggregates all your accounts in one place to help you analyse spending, create a budget and help you achieve your financial goals.

Why not ditch trying to manage your multiple accounts separately and bring them together to paint a better financial picture of your circumstances?

7. Dangerous payday loans

Short-term payday loans are an incredibly expensive way to borrow and if you're in the habit of resorting to one you should definitely think of ditching this tendency for the New Year.

December is a long, expensive month and could leave many with no money to see them through to payday. And now TV adverts and catchy radio jingles are convincing some that a short-term payday loan might be the answer.

The problem is short-term loans come with sneaky fees and high interest rates, some as high as 4,000%! It's an expensive method of borrowing even if you pay the loan back on time but in some cases the loans are creating a debt spiral many cannot escape. National Debtline has taken over 9,500 calls this year about the troubles payday loans are causing.

If you're struggling and think you might need to turn to a payday loan in the New Year read The best alternatives to payday loans for some other options. Alternatively if you are stuck trying to pay one or multiple payday loans off talk to the Step Change Debt Charity or National Debtline for guidance on how to restore your finances.

8. Expensive credit card debt

If you have expensive credit card debt you should try to get rid of it this New Year.

You can easily reduce the cost using an interest-free balance transfer credit card. This handy tool allows you to freeze the size of balances so you can focus on paying off the amount you owe rather than the interest.

The best card around at the moment is the Barclaycard 24-Month Platinum Visa which offers 0% on balance transfers for two whole years. The card comes with a 2.1% fee which is quite competitive at the moment but isn't the cheapest you can get.

Shop around and use our credit card comparison centre for one with the right fee and timeframe for you.

9. Financial loyalty

Sounds like an odd thing to ditch for the New Year but financial loyalty - or rather financial apathy - is a bad habit that is costly and really needs to go.

It's tempting to stay with the same provider year on year but loyalty very rarely pays and is often fairly cheap with customers just three months in enjoying the same privileges as longstanding account holders.

Switching to better savings, mortgages, loans, credit cards and current accounts can leave you better off. Make a break for it and experience what other providers have to offer new customers. Ditch and switch today!

10. Pension phobia

Perhaps one of the costliest bad habits we should kick is putting off thinking about and investing in a pension.

In October the first stage of auto enrolment began, a process designed to bring every worker over the age of 22 but under the age of retirement into a pension scheme.

Although this strategy is designed to force people into thinking about how they will afford to retire, auto enrolment is moving slowly and will take five years to make a difference to everybody with the employees working for the largest employers up first.

But you could get ahead and make plans for your retirement now. Talk to your workplace to see if there is any plan already in place that you could take part in and see how much you could set aside.

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Ten things to ditch this New Year

Using a mobile phone to make and receive calls, send texts and browse the web while abroad can be extremely costly – especially if you are travelling outside the European Union (EU), where calls can cost up to 10 times as much as at home.

To avoid high charges, Carphone Warehouse suggests tourists ensure a data cap is in place, use applications to check data usage, turn off 'data roaming', avoid data-intensive applications such as Google Maps and YouTube and use wi-fi spots to update social networking sites.

Payment Protection Insurance (PPI) is supposed to help people to continue meeting their loan, mortgage or credit card repayments if they fall ill or lose their jobs. However, policies are often over-priced, riddled with exclusions and sold to people who could not make a claim if they needed to.

At one point, sale of this cover - which was often included automatically in loan repayments - was estimated to boost the banks' profits by up to £5 billion a year.
Now, though, consumers who were mis-sold PPI can fight back by complaining to the bank or lender concerned and taking their case to the Financial Ombudsman Service (08000 234567) should the response prove unsatisfactory.

It could be you, but let's face it, it probably won't be. In fact, buying a ticket for the Lotto only gives you a 1 in 13.9 million chance of winning the jackpot.

With odds like that, you would almost certainly be better off hanging on to your cash and saving it in a high-interest account.

No-frills airlines such as EasyJet may promote rock-bottom prices on their websites. But the overall fare you pay can be surprisingly high once extras such as luggage and credit card payment fees have been added - a process known as drip pricing.

Taking one piece of hold baggage on a return EasyJet flight, for example, adds close to £20 to the cost of your flight, while paying by credit card increases the price by a further £10.
It may therefore be worth comparing the total cost with that of a flight with a standard airline such as British Airways.

Cash advances, which include cash withdrawals, are generally charged at a much higher rate of interest than standard purchases.

While the average credit card interest rate is around 17%, a typical cash withdrawal of £500, for example, is charged at more than 26%.
What's more, as the interest accrues from the date of the transaction, rather than the next payment date, costs will mount up even if you clear your balance in full with your next payment.

Supermarkets such as Tesco and Asda often run promotions under which you can, for example, get three products for the price of two.

However, it is only worth taking advantage of these deals if you will actually use the products. Otherwise, you are simply buying for the sake of it, which is a waste of your hard-earned cash.
To avoid paying over the odds, it is also worth checking the price per kilo to ensure that larger 'economy' packs really are cheaper than the smaller versions.

Buy a train ticket at the station on the day of travel and the price is likely to give you a shock - especially if you are travelling a long distance at a busy time of day.

However, you can cut the cost of train travel by 50% or more by going online and making the purchase beforehand - especially if you book 12 weeks in advance, which is when the cheapest tickets are on sale.
Other ways to reduce the price you pay include avoiding peak times and taking advantage of so-called carnet tickets, which allow you to buy, for example, 12 journeys for the price of 10.

Most High Street banks offer packaged accounts that come with monthly fees ranging from £6.50 up to as much as £40, with a typical account charging about £15 per month.

Various benefits, such as travel insurance and mobile phone insurance, are offered in return for this fee. But whether or not it is worth paying for them depends on your individual circumstances.
Before signing up, it is therefore essential to check that you will make use of enough of the benefits, and that you cannot get them for less elsewhere.

Overseas money transfers or travel money purchases attract the same high rate of interest as credit card cash withdrawals.

Worse still, most credit cards – and debit cards – also charge you a foreign loading fee if you use them to make purchases while abroad.
You can, however, avoid these charges by using a Saga Platinum or Nationwide Building Society credit card.

Numbers starting 0871 cost 10p or more from a landline, while those starting 09 can cost more than £1 a minute from a mobile phone.

And the operators of these high-cost phone lines, some of which are banks, often get a cut of the call charges.
Most 09 numbers are linked to scams and should therefore be avoided at all costs, while 0871 numbers can often be bypassed by searching for an alternative local rate numbers on the saynoto0870.com.
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