3 drains on your money and how to avoid them

I recently did a cost vs. savings check, which hit harder than an opening State Of Origin tackle!

You've probably heard of ‘bill-shock’ - unwanted surprises in your monthly bills - but the shock of realising regular fees or that interest rate charges are higher than you recall can also really sting.

So here are my tips on how to save some money on three key personal finance areas - credit cards, savings accounts and the big one, home loans.

Credit card costs

Credit cards can be very useful, especially when you're travelling and need a globally accepted form of payment. Credit cards are quick and flexible, though they do come with costs as I was reminded recently, slugged with an annual fee of close to $90 and an interest rate on purchases of 21%. 

Sure, $90 isn't the highest out there in the market, but it's also not the lowest. Guess what? The lowest is $0. As for interest rates, the current average in the Mozo database is 17.34%, so my 21% isn't so hot. I can do better - you can do better! It's worth noting that you can get a credit card interest rate under 15%, but as always be sure to stack up what costs are involved or if there are any other hidden terms or conditions.

Savings account costs

When you think of savings you don't usually think 'fees'. But some accounts have 'account keeping fees', an extra cost for holding your money. I don't get hit with an account keeping fee as such, but my savings interest rate took a hit when I didn't make my required monthly deposit. Down my earning rate dropped, from 5% to something pitiful under 1%. 

Savings accounts can be tough this way, if you don't choose a good one. (Our experts work at finding you the top savings accounts on the market if you want to do some quick comparisons yourself).

Home loan costs

Finally to my home loan, which I've mostly been happy with. Then I figured that without an offset account I was losing out. Why? Well, because with some money parked in an offset I could reduce the amount of interest charged on my overall home loan. Anything to pay off a home loan faster seems like a really solid idea. In short, the higher the balance and the longer the period, the less interest you’ll pay.

That’s just the start - there are also better interest rates out there! So I looked for a home loan with a slightly better rate than the one I was on. This small difference resulted in notable savings. 

Consider these quick numbers:

My old rate was around 6.60%, and on a $500,000 home loan over 25 years that equates to a monthly repayment of $3,407, as per the Mozo home loan calculator. My new rate is closer to 6% and so on the same size loan over the same period my monthly repayments reduce to $3,222.

Doesn’t sound like much? Well, over the whole loan that’s about $55,750 cheaper, according to the Mozo calculator.

So you can see that just by making small tweaks to your personal finances, you can end up saving a whole lot of money!