Money Matters

Everybody was Kung Fu Fighting – hooyah! OK, not quite, but armed only with plastic, Money Saving Expert Martin Lewis is here with his financial self-defence class.

1. Don't stash cash under the mattress — it's only covered for £750

I was recently sent this tweet (to @martinslewis): "My grandad just passed away. Found £22,000 in his flat. £3k in various jacket pockets and drawers, £19k in a suitcase." It's a shocking amount, and fills me with fear. Not only is it forgoing interest, which could be tax-free in a top cash Isa, but most home insurance policies only cover up to £750 cash and require proof via a receipt/bank statement, meaning if something happened to it, it’d be very difficult to claim back.

Plus, as fireman @ddukeofdarkness told me: "Money under the mattress makes a nice accelerant in house fires for us to deal with."

2. Save in a UK bank and you're covered for up to £85,000

The alternative is money in a bank, building society or credit union savings account or cash ISA (not supermarket or savings schemes). Provided it’s UK-registered, if the bank were to collapse, the Government's Financial Services Compensation Scheme promises to pay out up to £85,000 per person, per financial institution.

Don’t think means UK-registered means only UK banks. The vast majority of big banks have this protection including Santander, HSBC, ICICI and more. The only major players that don’t are ING Direct and the Bank of Cyprus. With those, you’re reliant on the Dutch and Cypriot governments, respectively, for protection.

To check your bank's protection, see Martin’s Are My Savings Safe? guide.

3. Pay 1p on a credit card to protect a £5,000 purchase

Another tip inspired from a sad tweet: "My 86-year-old dad put a £120 deposit at a restaurant (he doesn't believe in plastic). It's gone into administration, what can he do?" Unfortunately, the answer is not much.

If you need to pay, the safest way, counter-intuitively, is by plastic. Buy goods for £100-£30,000 on a credit card, and legally the card firm's jointly liable under Section 75 of the Consumer Credit Act, so you can claim a refund from it. This isn’t just for failed delivery but covers all your consumer rights (see trading standards info) so even if an item breaks later, you could claim from the card firm. Surprisingly, even if you pay just 1p on the card for, say, a £5,000 kitchen, it's still liable for the WHOLE amount.

So I always pay for big things on credit cards – yet crucially, set up a direct debit to repay in full each month so there’s no interest to pay, otherwise the cost dwarves the safety dividend.

4. Even debit cards have more protection than cash

While the credit card protection is legal, there is a lesser protection on a debit card. Pay on a Visa or Mastercard debit card (any amount on Visa, min £10 on Mastercard), and if a company goes bust or fails to deliver, you can ask your bank to get the money back from the firm’s bank via a chargeback scheme. It's only a last resort, and you must complain to your bank within 120 days of realising there’s a problem for it to work. But it's better than nowt.

5. Beware recurring payments

If a firm wants your long card number, beware. Direct debits are set up with bank account details, and allow easy cancellation rights. Yet if with subscriptions, eg, where telecoms firms, payday loan companies or websites want your credit OR debit card’s long number, it's a recurring payment (or continuous payment authority). These let them take payments when they want, and can be a nightmare to cancel.

They shouldn’t be a nightmare. In November 2009, rule changes now mean if retailers refuse to cancel, your bank/card firm MUST cancel if you ask – but they often don’t know this and it can be hell. If a bank refuses to cancel, take it to the free Financial Ombudsman Service.

6. Just because it's legal tender, shops needn't accept your cash

You may be surprised that NO bank notes are legal tender in Scotland. In England and Wales, only Bank of England notes are. Yet legal tender is meaningless in day-to-day life. Anyone can choose to accept or refuse any payment. Legal tender only means it can't be refused as settlement of court-ordered debt. But a quick word to English shopkeepers: please accept Scottish and Northern Irish notes. While not legal tender, they are UK Parliament-approved legal currency, which makes them a perfectly acceptable way to pay.

http://www.itv.com/thismorning/life/money-matters-with-martin-lewis-180612/