The Incentives Attached To Financial Products - Who Really Pays The Cost?
The UK financial sector is perhaps one of the most competitive in the world, which is why it attracts the attention of so many overseas conglomerates. In the midst of this excessive competition we often see some great promotional “incentives†to take out certain products, services, etc.Â
While many of these “offers†sometimes seem too good to be true, who really pays for them?
Some of the more common offers include :-
· Reduced interest rates on credit cards, loans, etc.
· Nil commission on Investment Trust purchases.
· Small gifts to entice you to a particular company.
· Cash back on mortgages, loans, etc.
· Introductory offers.
The main purposes of these offers is to attract your attention, as once the salespeople have your attention, there is a good chance you will take your interest further. These headline grabbing offers can often look a little different on further investigation, and you really need to question the offers in front of you. Some points to remember include :-
· If the product / offer being promoted is so good, why does it need additional selling points?
· Have you read the small print?
· Are the interest rates, cost of service really that competitive once you take out the promotional offer?
· Would you actually use the promotional offer?
· Does the agreement lock you in for a certain period?
· Are the basic terms of the product as competitive after the introductory period is over?
While the above points all seem sensible, too many people appear to be blinded by for example, the offer of reduced interest rates for the first 6 months, without realising that the rates / charges are uncompetitive after the introductory period. Many of the free gifts offered (e.g. vouchers, etc) are another way of enticing you to certain establishments, which will have a business relationship with the financial institution.
The old adage “There is no such thing as a free lunch†stands true in the financial industry - check the small print and do not be blinded by the headline grabbing short term offers / gifts.
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