Five facts your bank doesn't want you to know

Banks rely on these common misconceptions to make more money off their customers

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When it comes to getting the best deal off your bank, knowledge is power.

The more you know about how their products work, the more likely you are to choose the one that works best for you 0 and not for them.

So let's take look at five common misconceptions that many customers have. Some you might already be aware of, others you might not.

If you think we've missed an obvious one, why not let us know in the comments section below

The mortgage with the lowest rate isn't always cheapest
There is no single mortgage on the market that will work out cheapest for every borrower. Instead, it depends on your own situation (specifically, how much you need to borrow and how quickly you can pay it off).

Many banks will advertise mortgages with attractive low rates, only to bulk up their profits by charging fees that run into the thousands of pounds. Often, you will be better off choosing a deal with higher mortgage rate but far smaller fees.

Always take the time to compare mortgages based on overall costs rather than simply looking at headline rates.

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Interest is (usually) optional
While most customers are already aware of interest-free credit cards, there is a common misconception that they are only available to people with an excellent credit rating.

In fact, there are cards out there offering a (shorter) interest-free period to those with a less than perfect rating.

For example, Barclaycard's Initial Card offers 0% for six months on new purchases and is suitable for anyone looking for their first credit card or trying to rebuild their credit history.

Similarly, the Barclaycard Platinum Credit Card offers 0% for 18 month on balance transfers (2.9% fee) to anyone with an average credit rating.

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Always pay for insurance up front
As you know, it's essential you take the time to shop around for a new insurance policy rather than simply accepting the automatic renewal from your current insurer, which is usually massively overpriced.

However, there's no point in putting in all that effort to find a cheaper policy and then choosing to pay it off monthly.

That's because you will be charged an extortionate rate of interest – sometimes in excess of 30% - on your debt, potentially adding hundreds of pounds to your total costs.

If you don't have the funds to pay for your policy up front, put it on a 0% or low rate credit card instead.

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The longest balance transfer offer isn't always the best
0% balance transfer offers have never been more generous – with banks offering up to 33 months interest free.

But if you have a debt you need to transfer, think carefully about the card you choose. Provided you have an excellent credit rating, you might think it best to simply choose the longest 0% offer.

Unfortunately, these deals charge hefty fees ranging anywhere from 2.7% to 3.5% of the balance. By contrast, some of the shorter deals come with far lower fees – the Nationwide Select Low Balance Transfer Fee Card has a 15-month 0% offer and charges just 0.55%, while Sainsbury's Nectar Low Balance Transfer Fee Card has a 12 month offer and 0.5% fee.

So if you are able to pay your debt off sooner, make low balance transfer cards your first port of call and you could save yourself a bundle.

Find a credit card that is right for you

Credit cards aren't just for racking up debt
Used wisely, credit cards can actually be a nice little earner. Cards such as the Amex Platinum Cashback Card and Santander 123 Credit Card could earn you a tidy cashback sum, while the British Airways American Express Card will help you rack up free Air Miles/Avios.

The key is to ensure you clear the balance in full each month and only use the card to buy things you were going to buy anyway.

You might also be interested in our piece on how banks make money off of you.

Money-Saving Myths: Fact or Fiction