Does it really pay to shop around?
Shop around is a mantra among personal finance journalists, but what does it actually mean, and is it worth the hassle?
Well, it depends. Not everything you buy will warrant the time it takes to compare prices. This is often the case with cheaper items such as your groceries. Do you really care about saving a penny or two on your baked beans?
Then there's the time and costs to think about. For instance, a saving of 1p per litre of petrol would be wiped out if you have to make a 50-mile round trip to buy it. That said, for many purchases it's worth investing time comparing the market and a variety of websites can help.
These include discount voucher sites; cashback websites, where you earn money as you shop; auction sites, where you can pick up new and used items at reduced prices; and comparison sites, which pit deals against each other to show you the best price.
"I never pay the advertised price for any major purchase," says Gail Swift, 39, a museum retail manager from Weymouth. "I'll always use the internet to research prices and see where I can get the best deals."
As an example, she recently bought a fridge; after researching models and prices she bagged a £300 model for just £200 including delivery on the Comet auction site.
However, comparison sites are often the best way to find the cheapest deal. How often you need to visit these sites will depend on what you're buying. If you're tied into a contract, for example on your mobile phone, it's sensible to have a look at what other companies are charging around a month before you need to renew.
For more open-ended deals, such as your gas and electricity, a regular annual or six-monthly check will ensure your deal isn't out of kilter with the market.
And keep an eye on the news. A change to the Bank of England base rate, price rises in the energy market or new competition in the insurance market can affect pricing.
Lee Griffin, chief operating officer at gocompare.com, says that some customers are reluctant to shop around.
"Our recent switching research shows that 23% of UK consumers have never switched provider for any of the most common financial products. These people could be missing out on significant savings," he says.
By way of example, Griffin adds that in 2010, its customers saved an annual average of £296.07 by switching their car insurance; £238.22 on home insurance; and £442.13 by switching energy providers.
But don't just use one comparison site. You'll get a better picture of the market if you use a few. However, some companies, including Aviva and Direct Line, don't appear on comparison sites so it can still be worth going to them directly when searching for a deal.
It's also important to make sure you compare like with like when you use the sites. "Compare what each policy includes for the price," says Griffin. "The cheapest quotes may not be as comprehensive as the policies that are just a few pounds more."
And remember, when you're shopping online for goods rather than financial products, delivery costs can turn a bargain into a rip-off. Credit card charges are another hidden nasty. Some websites charge extra for paying with them, so factor this into your decision.
Finally, though comparison sites can scour the market for you, sometimes the personal touch pays. Lesley Gowers, 60, a publisher from Bedfordshire, always checks out comparison sites.
"They're great for price comparisons but I never book a holiday through them," she admits. "Instead, I use them to find a hotel I like and check prices before calling the hotel direct to get a better deal."
Lesley recently booked a hotel in Ireland, getting the same price advertised online plus a five-course meal for two.
IS IT ALWAYS WORTH SHOPPING AROUND?
YES - Sophie Giles, 37, a chartered psychologist from London, is a recent convert to shopping around for a deal.
"I'd insured my car for years with Elephant and it was always around £300 a year. But after my car was written off when it was vandalised, my premiums shot up," she says.
With a renewal quote of £56 a month, Sophie used gocompare.com to find a better deal, saving herself £348 by moving to Sheila's Wheels. "I'm definitely going to see what else I can save," she says. "As part of my job, I've read all about people being too apathetic to make changes and I was guilty of this too."
NO - When it comes to shopping around for insurance, Roger Edwards, 45, an IT consultant from Bournemouth, says it's just too much hassle.
"You get a feel for what's a fair premium, and as long as I'm not offered much more than that I'll just renew with that insurer. It's not worth all the hassle with the paperwork to save £20 or £30," he explains.
As an example, he's been with his home contents insurer, Endsleigh, since 1996. "I know I've got a good deal and the premiums never increase by much so I don't bother to look around. What's the point?" he says.
A stockmarket security (a form of derivative) issued by companies on their own ordinary shares to raise capital. A warrant has a quoted price of its own that can be converted into a specific share at a predetermined price (called the conversion price) and future date. The value of the warrant is determined by the premium of the share price over the conversion price of the warrant. Warrants give the same economic exposure to an underlying security without actually owning it, and cost a fraction of the price of the underlying security.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Rather than shopping online directly with a retailer, if you go to the retailer via a cashback website (you have to register as a member), when you make a purchase the cashback site gets a commission and rebates some – or all – of this back to you. The cash being paid back to you will vary wildly from site to site and even from product to product, so check you’re getting the best deal before you buy.
Also referred to as the bank rate or the minimum lending rate, the Bank of England base rate is the lowest rate the Bank uses to discount bills of exchange. This affects consumers as it is used by mainstream lenders and banks as the basis for calculating interest rates on mortgages, loans and savings.