Why staying loyal to your bank or insurer could be costing you money

Why is it that once we've settled on a financial institution or company to provide us with a service we need, so many of us don't bother shopping around to see if there's a better deal out there later on?

This is how Galileo Capital's Warren Ingram sums it up:

"It's just one of those things where we find it so difficult to change banks or insurers that once we're in, we tend to stay. They even have a phrase for it - it's called inertia!"

As Ingram points out, this attitude could be costing you money.

If you've been with the same provider for a number of years, there's a good chance that you're probably overpaying for the services that you're getting now. And equally, he says, there's a fairly good chance that if you shopped around you'd get the same level of services and products at a better price from a competitor.

Most product providers offer great deals to hook new clients

Ingram points out that companies spend enormous sums to acquire new customers by offering sign-up bonuses, cashback deals, and waived fees.
The business model relies on this: attract new customers with the best deal, then gradually increase prices for existing customers each year.
This happens across almost every financial service in South Africa, especially with banks and insurance companies.
Loyalty programmes are designed to give the impression of rewarding customers, but the underlying price increases often outweigh the rewards, he emphasizes.

Banking products

As most of us are aware, there are massive variations in bank account fees.
Do you know what your account fees are and what services you receive for these fees? asks Ingram. "Do you really need that private banker or can you get the same service from a lower-cost provider?"
Home loans are also worth reviewing he says.

There are times when banks want to increase their home loan client base, and will offer good deals to attract more clients.
If you've had the same home loan for more than five years, it's worth reviewing your options, but remember there are costs involved in switching and take those into account.

Short-term insurance

It is in this sector that the cost of loyalty is most visible and most impactful, Ingram says.
When you renewed your insurance last year, your premium probably went up, and the company probably blamed inflation, crime stats, and escalating repair costs.
Some of that is real, but new customers are probably getting a better deal.
If you shop around every year or two, there is a good chance you can keep your insurance costs in check instead of watching them escalate faster than inflation. And, if you've been claim-free for a few years, use that as leverage.

Get all the detailed info in the interview audio at the top of the article