Special offers: don’t be blinded by ‘big discounts’

by , Senior Money Researcher Money 25 January 2013
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We all love a good special offer. Whether they’re in the supermarket or the bank, they can be hard to resist. On the other hand, our research has revealed that many financial special offers can be anything but special.

Special offer hanging on a fishing hook

Special offers like ‘12 months for the price of 10’, ‘30% off’ or ‘£500 cashback’ all sound appealing on their own. Some people even get excited about the prospect of a free meerkat toy when they switch their services.

Our recent survey found that people are obviously drawn to offers, as one in 10 took out a financial product as part of a special offer in the past 12 months. Almost half of those people admitted they wouldn’t have done so otherwise.

It’s true that a company might be giving you a good deal compared to its usual offering but, if it’s not cheaper or better than you could get elsewhere, what’s so special about it?

Cashback and online discounts

In one example we looked at, a mortgage deal for first-time buyers offered by Lloyds TSB came with £500 cashback, yet would leave buyers £3,000 out of pocket compared to the cheapest deals available on the market. This obviously isn’t an ideal situation for your average first-time buyer.

On top of that, we’re always seeing discounts offered for ‘buying online’. However, we found an offer from NatWest for 30% off home insurance if you bought online – yet when we searched for alternatives, we found a policy that met the needs of our scenario for £158 less.

When loyalty pays

Loyalty points can be another tempting incentive. M&S’s current account gives you loyalty points when you use its debit card, and even more points if you use an M&S credit card. It also offers £212 of M&S vouchers a year (including £127 of hot drink vouchers), a gift worth £10 on your birthday, and currently, you’ll get a £100 gift card when you open an account as well.

But the account costs £180 a year, or £240 with travel insurance. So if you don’t regularly shop at M&S, you could end up paying for an account with benefits you don’t end up using.

Offers are out there

I’m not saying that special offers are never worth it – there are loads of good deals out there. But it’s essential to look beyond the headline and shop around for alternatives before taking up an offer.

Have you taken out any financial special offers recently? Did they turn out to be worthwhile or do you wish you hadn’t bothered?

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Em

It is bizarre that people are taken in by these so-called offers. A good financial product should be priced to the bone. There is no margin left for generous discounts and give-aways, unless it is to hook you into a deal that will prove expensive in the long run. So either the product is over-priced to begin with, or the value of the offer (in monetary terms at least) is not truely stated. For instance, “£500 worth” of discount vouchers for opening a student bank account that you would be hard pressed to use on goods or services you really want or need.

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