I hate fees, they’re like taxes levied against you by the private sector. It’s especially galling when you have to pay a fee to apply for an ongoing service, like a mortgage – isn’t the provider making enough money without charging you for admin too?
And fees seem to be rising. New analysis from moneysupermarket.com shows that fees for fixed and tracker mortgages have risen by more than 20% since September 2009.
The price comparison site warned people not to be sucked in by low rates but to consider the whole cost. For example, the lowest two-year fixed rate mortgage is 2.64% from HSBC but it comes with £1,999 in fees.
Compared to that, the Bank of Ireland offers a higher two-year fixed rate at 2.78% but with a lower fee of £799. On a £150,000 mortgage, the higher rate works out at £943 cheaper over the two years once you factor in fees.
But it would be better to avoid fees altogether. So, starting with mortgages, how can you live a fee-free life?
Fees are so standard in the mortgage market that it can be hard to avoid them, especially if you want the widest possible choice of products.
However, it’s essential to consider fees when looking at the cost of a mortgage as you might find a fee-free deal works out cheaper overall.
There are plenty of fee-free mortgages available. For example, both NatWest and Santander offer a two-year fixed rate at 3.49%, with no fees. However, these kinds of deals are only available to customers with high deposits and all tend to include an early repayment charge (ERC).
Make sure you’re clear about any ERC or exit fee when you take on a mortgage. ERCs tend to be a percentage of what you owe, so they can be an unexpected and high cost. Avoid any mortgage that charges an ERC even after the initial fix is finished.
If you do use a product with an application fee, avoid adding it to your debt if you can. Otherwise you’ll simply pay interest on it for years.
Avoid remortgaging entirely
Another option is to avoid remortgaging and so escape any fees entirely. Services like RateGuard allow you to insure against rising mortgage costs, for around £23 a month per £100,000 of mortgage debt and for some people might be cheaper than remortgaging.
It’s an insurance policy that agrees to pay out if your mortgage rises - effectively giving you a fixed rate deal without having to pay legal, valuation, application or any other fees.
For example, one customer bought a two-year policy with a 1% excess and capped her rate at 3.5%. She paid £11 a month but saved £2,497 compared to the cost of remortgaging onto a new two-year fixed rate.
Credit card fees
It only takes a few moments to set up a direct debit to meet your monthly credit card repayment, but this is an easy way to avoid a £12 fee for late payment.
You also need to know what kind of transactions result in charges, so you can avoid them. For example, most credit cards charge a fee for withdrawing cash from an ATM, usually around 3% or £3, whichever is higher.
So consider using your debit card to withdraw money instead, or simply spend with your credit card instead of cash withdrawn using your credit card.
There are also charges for overseas use that you can dodge using a currency card, specialist credit card or a current account that doesn’t charge.
Some shops and websites charge a fee for using a credit card, and these can be hard to avoid. Sometimes you can simply use your debit card instead – although this does mean sacrificing your protection under Section 75 of the Consumer Credit Act 1974.
That makes your credit card company equally liable with the seller if there’s a problem with your purchase, and you might decide that’s worth the fee.
However, some sellers charge a fee for both credit or debit card transactions, making it really hard to avoid. One of the most notorious is Ryanair, which appears to consider paying an extra service!
It charges £6 per person per flight, which can considerably increase the cost. It’s not alone – many budget airlines levy a card charge although most do offer one fee-free payment method. So if you can jump through the hoops, you can avoid the fees.
With Ryanair, you have to use its very own Ryanair Cash Passport prepaid MasterCard to avoid the charge.
If you can’t escape the fees then make sure you factor them when comparing prices. After all, if they push the price up too much then it might be cheaper and more pleasant to fly with a less basic airline.
Booking gigs and theatre tickets
It can be so expensive to see live music, comedy or theatre and the booking fees don’t help.
For example, a ticket to see Jimmy Carr on tour this month costs £25 through ticketmaster, plus £3 in fees per ticket, plus delivery costs of £2. So that’s an extra £8 for a couple wanting to catch the show, and it isn’t as though the tickets were cheap.
Of course, the websites need to make some money selling the tickets but sometimes you can avoid fees by buying directly from the venue, and save on delivery costs by collecting from the box office on the night.