Cutting corners can cost you in the long run

BEWARE THESE FALSE ECONOMIES TO TRY AND SAVE MONEY

- TRICIA PHILLIPS

WE are all looking for ways we can cut back at the moment, trying to ease the pressure on our household budgets.

Eight in 10 of us are worried about the cost of living, and half are unsure about the future, so it’s hardly surprising that more than nine in 10 people say they are doing something to cut their costs, according to research by Hargreaves Lansdown.

However, while there are some ways to cut back that will work and help with financial pressures, there’s always the risk we’re tempted to make a cut that backfires. So it’s worth knowing some of the changes that can end up being a false economy.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “Right now it’s a great idea to cut back your spending wherever possible, but you need to consider really carefully where you make these cuts, because some changes could end up doing more harm than good – and can end up costing you more over time.”

7 FALSE ECONOMIES

The temptation versus the risk

1 Credit card minimum payments

The temptation: You’re only required to make the minimum repayment on your credit card. This tends to be between 1% and 3% of your bill, or something between £5 and £25 – whichever is highest. During tough months it’s tempting just to stick to the minimum.

The risk: These minimums are designed so you carry your debts for decades – and in some cases forever – lining the pockets of the credit card company with interest payments. The longer the period over which you make the minimum payments, the more it will cost you in interest.