Managing credit limits and balances

BBC Sounds Music, Radio Podcasts The system is far from perfect. Arguably it's quasi broken. I don't know it seems to work against the consumer every time it'.s But not designed to work for the consumer. I think there's a mistake in the premise. If you might end up spending money that you don't have because you've got this facility, then it's not worth it. It's a really interesting question. Hello, I'm Martin Lewis and this is the cumningly named the Martin Lewis podcast. I do wonder what that's gonna be about. And this is our big topic episode where each week we lead on one main subject to help you save. Usually most of it comes from my BBC radio fiber live show with Adrian Chiles, but there's also boneless money saving tips just for you, lucky lucky podcast listeners. Let's get straight to it I got wheels . I got to pay . So I'm gonna work hard living . I got a piece got to be so I'm gonna make sure everybody Martin Lewis, how you doing? What have we got for us this week? I'm doing well we have a potery of subjects today. It's a split major if you like two big topics. It's a bog off that we're doing first of all, energy direct debits . This is the perfect time of the year if you're on a monthly direct debit to check. If you're in too much credit, energy firms are sitting on three billion pounds of our cash and you can get it back . Then what's the cheapest way to spend abroad? We're doing it right now because some of them you need to get early and get them in your pocket ready if you're going away this summer. We'll be going through lots of people's questions on that and I'll be giving you the absolute perfect maximize every penny or every cent or every Zoloti of your money . And then tell us this week when have your children impressed you with their financial knowledge , how old were they and what did they do? And this week's mastermind is a really tricky one, Adrian . I need to be honest with you, it's a gray area of consumer rights. I had a couple of differing answers , but we are going for the gold standard answer and I'll explain why it's the gold standard later on. Okay, I like them when they're tough. I feel less bad when I get it wrong. Do get in touch message eight five eight WhatsApp O eight three. We can email Martin Lewis podcast at bbc dot co dot UK So Martin, any accolades or awards this week? Would we get those out the way first? Best broadcaster with an ulcer on his tongue. Oh right. How was that? I had to have to say on my show on Tuesday night, my tele show was an hour long live, really painful ultra tongue, had it seven days. I did not know how I was going to do it. I was slurring as if beforehand as if I'd had, you know, four pints before going on but, two parasetamons, two eyebuphens and some magic spray on it and I managed to get through the show. It is improved now, but you may hear the odd bit of lisping as we go through today. Please forgive me everyone. There's a little bit of tongue pain. And I thought you were seen tongue to start the show. So I've seen it up. You've seen a clinician about this, I see. No, because it's only had it seven days. You're not really meant to unless you've had it two weeks. It's just an answer. It's just in a very painful spot on the side of my tongue so it keeps a brushing along my teeth, which I'm not enjoying very much. Okay , so no vigorous kissing for you this week then. No, well, you're in card if I'm in London. We need very big tongues . Energy direct debits . Yeah, so this is literally perfect time of the year to check if your energy direct debit is in too much credit . It's a calendar thing I do every year. Energy firms are sitting on three billion pounds of our cash . Now look , let's just go back to raw concept. What is a monthly direct debit? The idea is pretty good. The idea is obviously we use more energy in the winter when it's cold and less in the summer. So instead of really troubling people with cash flow, so they have to find a lot more cash in the winter , then we spread the cost over twelve months so you pay roughly the same every month over the year and it's a good budgeting application. The problem is the way it's executed. We'll come to that in a moment . But this is why now is the crucial time and I have perhaps the sexiest thing that's ever been seen on radio in front of me . It is my energy direct debit cycle graph. Right smoking . So really, I mean, this this is is the type of thing that gets me excited at night. Here we are. So here's the here's the general picture. If you think it starts in January , in January because you're still in a high use time, the amount of credit or the amount of debt you have, the amount of credit is reducing or the debt is building up because we're still in that high use period. The curve, which is like a sign curve , bottoms out at the start of May, which is why we're talking about right now. So this is the point in the year where you should have the minimum amount of credit or the maximum amount of debt that all depends when you started your company, whether you're in credit or debt. Then after now because we move into the summer , you start to build up your credit or reduce your debt until we continue to smooth it and we get to the opposite point in the cycle when you should be most in credit, which is in the beginning of November . So it's that perfect sign curve. So those are the two points in the year when you're getting the most accurate check of whether you're too much in credit. So what everybody needs to do now , assuming that you've got a working smart meter that does regular meter readings for you or if not, make sure you do an up to date meter reading first and be sure that that's incorporated into the firm's calculations . As long as your direct deb its are right and there are calculators online and you can check that , have a look now to see how much credit you are in. And what I would suggest you do, my rule of thumb is if you are more than a month and a half's direct debits in credit at the moment and I do a month and a half because energy bills are likely to rise in April so there's no in July rather by about twelve percent if you're on the price cap if you're on a fix it's less of an issue . So you need to have a little bit of wriggle room. If you're more than a month and a half in credit right now, I would say that is too much. Simple as that. So that's what you need to be checking. , and should we go into questions? We can do, yeah. Sure. James, thoughts on why British gas don't allow you to pay for what you use per month via direct debit can only do it via standing order and also means missing out on a discount. I was told this was the direction of travel for energy billing. Very different with octopus who I'd switch from. Okay, slightly so slightly different issue here. I absolutely understand this. Look, the biggest problem with monthly direct debit , it well's a brilliant concept is the terrible execution by some firms and the fact that they're sitting on three billion pounds of our credit and it's being allowed to stock up and that this is all because the estimated estimate of our usage isn't good enough . And you have a right, first thing to say, didn't mention earlier, you have a right to a fair direct debit . That is absolutely crucial. It is locked in by law. Condition twenty seven of both the gas and electric ity supply license rules, not in Northern Ireland says suppliers must set fair direct debits, give clear explanations and refund credit where appropriate. Now the reason people don't like direct debit is because it goes wrong and they feel they're paying too much money and the direct debit does not represent their bill. If you do everything I say including the direct debit check it should work. Just aside, I'm not answering the question yet, we'll get to that. If you're in too much credit , ask the firm why go to your firm and say to them get on the online chat or email to ask why am I in so much credit? Check there's not a legit reason and if you're in too much credit more than a month and a half I would ask for the difference back. So if you've got three months worth of credit, let's say your direct debit is two hundred pounds a month and you've got six hundred pounds of credit at this time of year, I'd be asking for three hundred pounds of it back. Now the reason for this request, lots of people do hate direct debit so much they go to what's called payment in receipt of bills. The problem with payment in receipt of bills where you get a bill and you pay it is it costs about eight percent more, so you will pay more to pay via that system . An alternative variable direct debit. It works like payment in receipt of bills. You pay based on what you use each month, so you'll pay more in the winter, you'll pay less in the summer, but it's collected by direct debit and therefore you are getting the discount. You're getting the direct debit discount. You're not paying the eight percent premium. Some firms offer it, some firms don't. Now, the questioner says British Gas don't. I thought they did , but I think it isn't written in their general systems. I think you have to call up and ask them to go on variable direct debit. I'm putting that at a seventy five percent level of certainty, Adrian. You know, the question's coming in that British gas offer variable direct debit. So I would say core British gas up and discuss if you can switch to variable direct debit with them rather than payment in receipt of bills, then you at least get the discount. You get the eight percent savings, but they don't have to offer you variable direct debit so it is their choice. Next question from Michael. I can't say I quite understand it. I'm worried there's a word misses When will standing charge put on usage for gas and electric . I don't understand it anyway, but I presume it is the question that is probably the most common one I get on energy. So I'm going to answer that instead, Adriana , which is when are they going to get rid of the standing charge on gas and electricity bills? So the stand ing charge is the daily charge, that almost poll tax if you like that you have for simply for having the facility of gas and electricity. In my view, it's a moral hazard because it discourages people on lower usage to reduce their bills even further because so much of the cost is the standing charge. It's very unfair to say elderly people who only have their heat, their gas on in the winter, but they have to pay for it every day in the summer. This is over three hundred pounds a year fee for just for having gas and electricity. I do not see why fixed charges must be charged in a fixed way. They don't charge it in other forms of life. You know, the fixed charge is incorporated into the price that you pay for things. So I have long campaign for ledoweringing the stand charge and we were meant to get new trial lower standing charge tariffs on offer. Not what I would have done. I would want to see lower standing charges as an alternative price cap mechanism. They're not doing that. They said they would, then they reneged. Then we were meant to get these special lower standing charge tariffs coming in, but now tumbleweed. And obviously that is because of what's going on in the Middle East, it's put everything on hold. My team and I are actually chasing to see what's happening with standing charges, but it is not going the way that many people want and I do not have an update. Carol, we're with Ovo for electricity only and do not have a direct debit but pay in full monthly our bill being around sixty to seventy pounds. I looked at setting up a direct debit and they stipulated one hundred fifty pounds per month. Will the new system work against us and therefore would you recommend setting up a direct debit? Well, look, you could try for variable direct debit that I discussed before that is effectively paying in the way that you pay right now but via direct debt so the money's t aken automatically that would be cheaper. I mean, I am generally a fan of monthly direct debit done right. There's something going wrong here. Now it could be that they're saying across the year your usage will be higher. Clearly your usage is lower than it would now be in the middle of winter and monthly direct debit spreads a cost, but they may just have your estimates wrong. And let's just go back to basics here everyone. So many people get in touch with me and say I'm in credit. I'm paying one hundred and fifty pounds a month and they're saying they're going to ask for two hundred pounds a month. Why? Well, the answer is because they're a bit pants. They're simple as can say a different word, but they're a bit pants. So you get in touch and say that doesn't seem to be justified for me. That doesn't seem to fit. I'm entitled to a fair direct debit. I'm in credit, and I'm not using up my energy supply. Can you tell me why you think it should go up? I don't think it would. I'd like you to keep it one hundred and fifty pounds. And as long as the mass is on your side , you can do that. So in this case let's be really plain , you will pay less in total on direct debit than you will on pay and receipt of bills , it is around eight percent cheaper, so the total amount you pay will be less . This is a cash flow issue and they want too much of your cash temporarily that you would be able to get back. And you will always even if you move firm, it is always paid back to you. So they have miscalculated , if what you're saying is correct or you have miscalculated, I need to be honest , the amount that you should pay. So before you call them up and say, That's nonsense. I'm only paying sixty or seventy pounds a month. Why have you set my direct debit so high? Can you have a look again here are my numbers? Please give me a new estimate of what I'll be paying on direct debit. And that's just the way you need to operate it. And people sort of feel like it's a fate accompany. It's not a fate accompany. The system isn't perfect. You have to input into the system to make it work sometimes. Helen, regarding Energy Director , I'm with Ovo. I'm on a low income and get the one hundred fifty pounds winter fuel allow s. My monthly payments are one hundred and forty seven pounds . Over have decided to put this up to one hundred and fifty seven . I use very little gas in the summer. My actual combined bills are sixty pounds on average. Why are they doing this? My contract runs out in November and I'll certainly be shopping around. I can't answer the question, but you're already on one hundred forty seven and they're putting up, but you say your combined bills are sixty seventy. It's very similar to the last one. It doesn't make sense. Either you have the information wrong or they have the information wrong. And this is something you need to go and have a conversation with your energy firm. It may be there is a complete disjoint in there. I mean, they're probably putting it up because energy prices are likely to go up and they've done a slight review. So either you have the wrong data about your energy usage or they have the wrong data in their systems , and that's absolutely something that you need to correct. And of course, when you say your contract's up in November, so I presume you're on a fixed tariff , then you should be looking for what the best deal will be once we get to November. But there's no point in leaving this if what you're saying is correct. I mean, I have to say sixty or seventy pounds a month is a very, very, very low energy bill. I mean, that's less than half of typical usage, substantially less than half. It's very small amount of usage. You know, thirty quid of that is the standing charge . So it seems very low to me unless you're in a one person who doesn't use much energy in a relatively small property. So it may be that you have the wrong data, but talk to them . Get them on the phone, ask them what your kilowatt usage is. That's the way you need to do it. Go online, use a direct debit calculator, put in your actual kilowatt hours usage. You'll be able to find this on your bill or in your account online and that will give you a good idea of what you should be paying because something is wrong in that calculation . Okay, Liz, my question is how as an eighteen year old about to start university do I get direct debits approved for things like broadband and energy. I'm renting privately and I've just been rejected for broadband as I failed the credit check. I'm on the electoral roll but I don't have consistent income as you wouldn't . If you're an eighteen year old about to start university, that seems mad. Well, it's a very consistent thing that goes on and even more weirdly, some students are rejected from student bank accounts, others aren't, even though they have the same situation . I always say that credit scoring is a system of art not science and you have to understand that. Now this is where you get into one of those great moral dilemmas . So I'm going to give you first the technical answer. Whether that technical answer is suitable for you depends on you. The technical answer is the catch twenty two if you can't get credit if you haven't got credit means you need to get credit. So even at the age of eighteen , you need to get some form of borrowing. Now it could be an overdraft facility, even better would be a credit card. This is the technical answer, not the moral answer, would be a credit card. You need to be putting about fifty pounds a month of your normal spending on that, not an excuse to spend more. And you need to be then paying it off in full every month to make sure there's no interest. You do that for six months to a year and you start to build a picture of yourself as a good credit citizen. It's important to understand credit scoring is about behavioral predictions. They're trying to use the data they have on you to predict how you will in future. So if you've got a past as a good credit citizen, they will then predict you will behave like a good credit citizen. If they have no data on you, then you tend to get rejected, not because you're a bad credit citizen, but because they can't do the prediction. Can I just say but for all the supposed sophistic ation of the way they do. It's actually a really blunt instrument . Yes . You know, it's a bit like calculating car insurance and so on. It's just it's just a blunt instrument in which you , I don't know, it seems to work against the consumer every time. But it's not designed to work for the consumer. I think that's a mistake in the premise. And I'm not justifying it for any moment, right? You know, agent, it's like this. You've got money . Are you going to lend your money out? Well, you're going to decide you're going to decide who you're going to lend money to and you're going to err on the side of caution because it's your money. We do not have a right. There is no human right to borrow. No, but there's everything on the side of the caution and just being a bit silly, which they are. Ultimately, the machine is asking an eighteen year old to provide , you know, to provide some totally agree. It's a catch twenty two, and we need to think about it more and the fact that it stops you getting broadband and it can stop you in sub circumstances getting monthly direct debit on your energy bills and all the other thing it disenfranchises you from. The system is far from perfect , arguably it's qu asi broken. I think that's all absolutely fair, but I don't do the system. I explain it My problem with suggesting you get a credit card is credit cards are really dangerous . In the good debt, bad debt equation, credit cards unless you are controlled understand you're just doing it as a technical way to put fifty credit a month on, giving an eighteen year old an open ended borrowing facility, which is what a credit card is. It has a credit limit. You can spend as much as you like up to that limit, you pay them off, and you can continue to borrow and you can live in hockey with the interest adding up and adding up and adding up. Isn't a good scenario. So if I forgive me, Adrian, what's the questioner's name? Liz. Liz , this is something you need to think about carefully, Liz. You need to know yourself . If you are , and it sounds like the fact you're asking the question and you're getting in touch with this program sounds like you probably are someone who's interested in finances, you've got good impulse control, you won't see this as a way to spend willy nilly, then getting yourself a form some form of credit card just technically to start building your credit score is a really good idea . If that is a risk, if you might end up spending money that you don't have because you've got this facility , then it's not worth it . Just don't do it. And hopefully things will come naturally to you as you start to get, you know, a student or whatever bank account as you go forward and it will start to build a little bit more slowly, but you'll get there in the end. And in the meantime, she's not going to get the best details on broadband or energy because she can't get the direct debit and she's just got to suck that up. Yeah . Oh, Liz arent sign up for her if that's possible depending on the situation. Liz, it's it's a mad world and it gets madder just so you know let's move on to look at the cheapest ways to spend money abroad . So why are we looking at that now unless you're planning sort of a whips and bank holiday away? Well first of all because it's the type of thing to get sorted and many of the solutions that you have are permanent solutions. So spending on plastic tends to be the very best route. So if you sort it now, you get it in your pocket, it applies every time you go away to every single country, it's great to have done. And there's also a new deal coming out today , which is a new best buy in the market. So I just want to go back to the basic premise. People need to understand what happens when you spend abroad on most plastic. On most plastic there's a thing called a non stirling exchange rate fee. That fee is around three percent typically . So what that means is if you pay on your card and you buy something that costs a hundred pounds worth of euros on that day, so that day's exchange rate . Well, the bank pays a hundred pounds for that one hundred pounds worth of euros or the card provider does , and you pay one hundred and three pounds for it. And there can be other charges too, such as withdrawing from a cash machine and some debit cards even charge you a little bit extra just for spending on top of it. So the primary solution here is to get yourself a special overseas spending debit or credit or in some cases prepayment card. And what's special about those cards is they don't add the non stirling exchange rate fee. So if you pay for something that costs a hundred pounds worth of euros or a hundred pounds worth of dollars or Zoloti ringits or Yen or whatever it is , it costs you one hundred pounds , meaning you get the same near perfect exchange rate as the bank or the card provider does . And right now I've got my list in front of me, I've got five cards. I'm not going to run through all of them just to give you an idea. Well, we'll take fullness. We'll take the top probably the top card at the moment, but it's a credit card, which means you will have to pass a credit check to get it and not everybody will get it. You of course need to make sure that you pay the card off, Adrian. Yes. In full info? Adrian. In full at the end of every month , otherwise there will be high interest charges. So let's just run through the first one . The new top pick is the Barclay Card Rewards Visa credit card. It's just overtaken the top credit card from the Lloyd's Ultra Visa credit card. So on it, you get one percent cashback on UK and overseas spending almost all of it for a year. You only get it for a year if you apply via the app. If you apply online, it's six months. So you want to be applying via the app for that . That's one percent cashback. So all of these cards give you near perfect exchange rates. On this particular card, you're also getting one percent cashback on your spending. So if you buy something that could cost a hundred pounds worth of euros effectively because of the cash back it's only costing you ninety nine quid. You're getting even better than the spot rates. You will, and the reason this is overtaken Lloyd's, which is also one percent cashback on spending for a year and both of them dropped to zero point two five percent afterwards . The reason this is the new top pick is on while they are both fee free for taking money out of a cash machine and they are both you won't pay interest if you pay the card off in full on spending. On the Lloyd's card , if you withdraw from a cash machine and pay the card off in full , you will still pay interest on the cash machine withdrawal. it's about one pound per hundred for the month. Whereas on the Barclay card you won't pay interest on the cash machine withdrawal, which why it slightly sneaks above the Lloyd's card in my top credit card pick. And of course , because these are credit cards, you get the full section seventy five protection, which means if you buy something costing between one hundred pounds and thirty thousand pounds, whether in the UK or abroad, then the credit card company is jointly liable. Now that's really useful when you're spending abroad because what it means is if something goes wrong or it's faulty and you've just been to Brazil and you can't take it back to the shop in Brazil because that would be a very expensive flight, you could go to your credit card company and say o,oy, you're jointly liable on this. I want my repair or my replacement or whatever it is. I want you to fix it, and you have that right within section seventy five. So overall , when it comes to cards , if it's a credit card you're after, Barclay Card Reward is my new top pick and that new one percent deal launched today only for new card holders, of course. So why don't we do a question now and then I'll run through debit cards a little bit l.ater Joyce is hoping to go into Italy soon. She says if they don't run out of fuel. I was thinking of Euros , I e cash, I see what she means and some on a card . But is best? I mean, that raised a question I was going to ask. If you if you want, for whatever reason, a sum of cash in your pocket, let's say you, Rose , are you best just drawing those out of a machine or what? So the best bureau de Change in the UK are almost always beaten by the near perfect exchange rate you get on plastic . When it comes to you want cash in your pocket . If you have a specialist card , especially if it's one that does not charge you interest or withdrawal from cash machines abroad , and as long as that is a country where the cash machines abroad do not charge you withdrawal fee, some do some don't, that's more difficult to tell . You will be better off going to the airport when you arrive and withdrawing cash on a cash machine than you will be taking it out of a Bureau De Change . So if you want cash and you've got a specialist card , it's doing it that way. If you haven't got a specialist card or you've got one that charges you an ATM withdrawal fee, then getting yourself onto there are a couple of them, travel money comparison sites and finding your self at the very best rate for the cash when you get there. And this is also good for a country where you're not sure that they will have and you will be able to spend or get your money out in cash once you arrive. They won't have easy access to cash machines that operate with UK cards or some countries like Japan where not every cash machine will work on it. Then if you want to get a little bit of cash coming out first , then you want to go onto a travel money comparison site and operate it that way. But generally the best way to get cash out is with the top specialist card . And you can't, obviously, you can't know the answer to this, but what about local bureau de Charge? It's a really interesting question . So there is an answer, actually. Yeah . If you're going abroad to a place that you've not been before and you're going to a small area that may have one or two bureaus de Changes abroad , it is very very un,likely you will get a better rate from that one or two exchanges than you would from doing a comparison before you go of forty exchanges or fifty exchanges in Britain because then you're seeking to cross the market to get an entire rate . So on the strong balance of probabilities, if you want the cash you would be better to get it before you go. I'm ignoring movements day by day in exchange rates because they're unpredictable. If however you're going somewhere that you go regularly and you happen to know there's a bureau that gives you great rates and it's given you them before and it always tends to be competitive then it may be better to wait until you're abroad. But that's quite an unlikely scenario, but it does I'm just doing it as a caveat as some people say to me, Ah, the place I go to in the middle of Greece, they give amazing, yet there can always be one or two. Yeah . But I would always go for the knowledge of a broadspread comparison versus the random chance that the village you happen to be going to will have one of these surprisingly and sometimes questionably cheap exchanges . And we've got more of your questions on the cheapest way to spend abroad, including the top debit cards and prepaid cards coming later in the pod. Martin, tell us about our Tellus this week. Okay, so this week's tellers when have your children impressed you with their financial knowledge? How old were they? And what did they do? Why don't you start, Adrian? Okay, Julie, my nine year old's always in charge of the scanner in Tesco 's. I buy mostly the same things every week so a rough idea how much it's going to be at the till. Last week as we approached the fruit and veg, he said to me, Mom, this total is too much. My response was a deflated, I know, that's inflation, a bit of a shrug. He then decided to check through the list of things he'd scanned and found three items he'd scanned twice by mistake, removed them and saved us seven pounds eighty two. But Julie, did you what proportion of that seven pounds eighty two did you reward him with or was it zero? Hold on, hold on, Adrian. I need to take you up on that. Go on. This was a young man who did brilliantly well. His mass was good, but his scanning ability was poor. I mean, he had double scanned in the first place. Yeah. I'm not sure that we should be recommending that if nine year olds double scan and then tell you they've double scanned, they get a cut of what they're double scanned back. I mean, that's a perverse incentive moral hazard it's a moral hazard. It's a moral hazard . You know, I suppose, but look, he corrected he corrected himself. He spotted his flaws. I saw his mistake. He owned up and he could have gone away with it. The pat on the back and a well done son is absolutely appropriate, but I just I would beware this. You know, he sounds like a very savvy young man. He's going to work out quite clearly that if he over scans and then calculates it back and he gets ten percent of that it could be quite a lucrative little business. Okay Peter, yep . When I was in financial difficulty and had to tell my then nine year old son I only had twenty pounds for his Christmas present, he smiled and said I can get two secondhand computer games from the market with that. So that's what we did. I love that. Good god love him heather, I can I just say yeah it's really interesting. I've met many families over the years who are going through financial difficulties and especially in the run up to Christmas they're like what we're going to do about Christmas? We don't want the kids to know and certainly with teenagers , I tend to find that when parents do actually tell their children that there are problems with the finances , they get it and they can help and they can work together. You don't want to worry them, you don't want to panic them. But having the convers ations about money being limited is an important one to do. And I think Peter telling his nine year old son about cash being limited and his son getting it and smiling and saying we can work something out. I think children tend to be more resilient on this and panic about it less than their parents. And I think the communication that Peter did is actually worth applauding to. You know, I was robbed once and but one of the things thatiss went m was aing wallet c andredit the c ard . And they found the credit card had been used and found what had been ordered and where it had been delivered. And it was a load of toys . And this was just before Christmas. And it I don't know just I don't know what I thought it just felt profound in its own way, you know, I thought , you know, I could understand somebody wanting at all costs to give their kids something for Christmas. On the other hand , perhaps we , you know, perhaps we misjudge our own children in that regard. Well, perhaps we do and perhaps that's not, I mean, listen, it's not for me to tell people the real meaning of Christmas, but I did once interview the former Archbishop of Canterbury about it and I asked quite an agendered question which was how do you feel as the head of the Christian church in England about the number of families who get into debt because of celebrating Christmas? And his big point is that isn't what it is about. It isn't about that. It's about celebrating gifts don't have to be financial. And you'll know I talk every year about packs to ban unnecessary Christmas presents to keep it short. Of course the kids need something, but I think we go back to a long time ago I did and I did it for Telly but it was the most fascinating thing I ever did is that we went to a school of six year olds and we said we had these presents in a room. It was near Christmas and there were these huge cardboard boxes wrapped up . And the first thing we did is we said to them, Adjustment No, all there is in the balloon boxes are balloons. And they got they opened them and there were these balloons and we supervised them. You have to be very careful with young children with blooms. It pleases a note . And the kids had so much fun just popping the balloons. They thought they were the best presence. And then as an experiment, we gave them these big said, We're going to give you big wrapped up boxes and I told them in advance what was in them because I didn't want them to be disappointed. And I said, There's nothing in them . And they were so excited again and they ripped open the packaging and they had these giant cardboard boxes that they thought were the best thing. And they played for over half an hour. They played for longer with the cardboard boxes when the warmth balloons in them than when the word balloom ins with them . And they were just excited to have the presence, even though it was a carpet boxes and they became tunnels and things to jump on and things to do . And I think that we sometimes bring our own retail snobbery, the idea that it's the price you pay for something that gives it the value, not the enjoyment you'll get from it. And we sometimes transport that onto our children and maybe we need to be careful not to do so. Text just in Dave from Worcester . My mum always told me that when you get an ulc er on your tongue, it means you've been telling lies. I've had a few people say that to me. Okay, let's move on. I make no comment on that. I don't know. Adriana, I'd like to say I think you do really, really well in the mastermind. Okay . All right, he's off said. You'll get another one now, then for saying that. Shall we do it? Heather. Yeah, I went on holiday leave my seventeen year old sixty pounds to feed her and her sixteen year old brother . She didn't say how long four she was away on holiday for, but that's what she left sixty pounds and she spent just twenty pounds. I was tempted to put her in charge of the household budget. Why not? I tell you, one of the best one of the ways I got into financial education that many people know I continue to campaign on to this day and we're seeing it hopefully it's going to join the core curriculum next year. It's already on the curriculum but that doesn't mean it has to be taught in schools is I did a program called Team Cash Class where I went in and taught for a day a group of fifteen year olds about money. And this was way before it was been I don't know, two thousand six, two thousand five . And I obviously had to have supervision in the back of the class because I'm not a teacher and I wasn't part of the school. The person who saved the most money was the teacher at the back , who was doing their finances the whole way through. The person who saved the second the most amount of money was that there was a young boy in the class who was very good at math . his And mum was not a first language English speaker and was a cleaner on a very low income . And he went home and put him into practice all the things I'd said, and I can't remember what it was, but he saved to something like fifteen hundred quid and from that day over onwards because he took over the household budget and they were I remember hearing later they were so much better off because he was quite you know he's good at his mass and he got into this and he started to do so putting your kids in hold of the household budget isn't the silliest thing in the world. Katie, my son was seven and I needed to borrow some cash from his money box to pay the window cleaner. He'd charge me interest at a daily rate. Wow, okay . Some people would say he's going to be a banker. Okay, yes. And Joanne, when my daughter, Katie was nine, she said to me very loudly in Tesco's, stop spending money we don't have on things we don't need. Bye me. Now she's an adult. I let her look after all our household finances I should think so. And we'll finish on this one probably Jen. Oh, I had the cutest moment. My older child was talking to their girlfriend about her new job and asked if she paid tax. She was sixteen and had no idea what tax was. Gobsmacked, my other child, only eight years old, popped up and explained, It's money you pay to the government and they use it and then they give you some money when you're old. We were all suitably impressed. Funny, I remember having the discussion about taxing with my daughter when she was about eight, trying to explain it to her and go through the whole point of taxation and how it works. It's a good conversation to have. It's a great test. My daughter my younger daughter was asking me how mortgages work and you know, you start thinking, hang on, am I explaining this properly? I mean, you know, just explaining the basics. It's I mean, there's no better person in the world than you than doing it, but you know, I think I just about got away with it, but put it like this. I'm glad you weren't listening in Martin. Or I might have been in trouble. I'm just going back to spending money abroad, Bob's got a question that I would also like to ask. Is Halifax Clarity still a good card for overseas spending? So the cards I'm listing today are my absolute top picks at the moment. Now there are actually quite a lot of specialist overseas travel cards of which Halifax Clarity credit card is one of them. It gives you near perfect exchange rates just like the Barclay cards and the Lloyd cards that I've mentioned, and it's a credit card too. But it doesn't give you the cash back so it isn't my top pick, but there's nothing wrong with it. You'll still get a decent exchange rate and there are lots of other cards in that category. So please don't read just a people. Please don't read that the top picks mean the one you've got that used to be a top pick is worthless. As long as it doesn't add a non sterning exchange rate fee, it can still be good to use. Two questions I've got on this that I've got full disclosure. I've got the clarity card. Yeah . And I mean, can those terms and conditions change? Yeah, can it stop can it stop being a trouble? Yes, it can, but not without notification. Okay, but all right, but you didn't so what does that mean? pr Inactice what, does that mean? One of a million alerts that could be a marketing thing, another piece of paper through the post or something you don't spend. Well Halifax Clarity was my top pick cheapest car for spending overseas for a number of years. So if it did change , you can first of all, I'll tell you, Adrian, we'll probably be doing it on here because I'll be loudly and proudly warning people to get rid of it and get themselves a new cheap overseas spending card. They tend not to though because these cards it's their big sell. I mean, if you look at that card, it's not particularly good for spending in the UK, it doesn't give you anything else. It's just a normal credit card as long as you pay it off in full there won't be any interest. It's big sell, the reason people went for it, the reason so many people like you have it is for cheap spending abroad. So I think they're aware that they would have really big exodus if they were to change the terms . And mysteriously it's gone from being a mastercard to a visa . Yeah. Does that make any difference at all to me . So I once we once spent ninety days it was analyzing the spot rates on Mastercard and Visa. So let's just get technical. You have a spot rate, that's the market rate. But there is also a visa, a mastercard and an amex wholesale rate. So if you provide a visa card, the exchange rate, the underlying exchange rate you get is the visa wholesale rate. If it's a master card, it's the mastercard wholesale rate. And then you have that non sterning exchange rate fee that they add on top There are slight differences between Visa and Mastercard. And we found if I remember rightly , Mastercard won on a few more days than Visa did , but the difference was very small and some days Visa beat mastercard. So does it make a difference? Yes. Is it a noticeable difference? Not really that much . And I wouldn't I would be judging more on, do you get the extra one percent cash back than the underlying wholesale rate because it's really difficult to do and it depends on lots of countries. But it does they are slightly different firms and they can on a day have, you know, but you're talking slight amounts of decimal point percentages change, nothing major. Okay . So when booking seas accommodation online via booking dot com is it best to pay in local currency or in pounds . Okay , so let's just be very plain . Whatever type of plastic you have , the safest thing to do is pay in the foreign currency. So if you're in Europe, it's euros, if you're in America, it's dollars, whatever country you're in, pay in the local currency. The reason is then your card is doing the conversion and that is at a known rate. Many times when you're paying on a foreign website, if you say I'll pay in pounds, it means they are doing the currency conversion for you and the rates you get are generally, I don't know specifically for booking . com Far worse than the rate you'd get converting yourself. But of course , even better is you get one of these specialist cards where you're getting a perfect exchange rate. But I know people who get one of these cards and then they go abroad and then they pay in pounds. Well then there's the shop abroad that's doing the currency conversion and you're not getting the gain of the specialist cards so paying yours or paying dollars if you're paying on a foreign currency don't let the shop do the conversion don't pay in pounds. Okay, but if I'm on booking dot com sitting in this country using booking dot com and I'm paying for something in Italy or wherever , then it depends what the pricing is. So if it's priced in pounds when you're going there, you're paying in pounds. If it's priced in dollars and asking if you want to convert it to pounds , then you don't want to do that generally. Now look , the easy way to do this, especially if you've got a specialist card is take that amount that you're being asked to pay in euros , find what the spot rate is on the day. So just put in spot rate euros. You don't want the holiday rate. You want a spot rate. Remember that phrase? And then do the conversion yourself. And that's roughly the rate you'll get on a specialist card, not one of the other cards and compare that. And generally you will find you're getting a better rate with your card during the conversion because it's at a near perfect rate. What about debit cards on this? , so one of the advantages of debit cards is with the right debit cards they can be far easier to get. There are two I would name the trading two hundred and one two debit mastercard and the chase debit mastercard. To get the trading two hundred twenty card , you can get it via its free investment account but you don't need to invest but you need to get the investment account to get it. To get the chase card you get it via its bank app , but you don't need to switch so it can be operated just as a stand alone card. The big advantage of both of these is you don't do a credit check so they are far easier to get . The trading two hundred two card gives you one and a half percent cashback on almost all UK and overseas spending but only till the thirty first of july it's half a percent after that. You need to enable cashback investing to do this, but it should work for you. The chase card doesn't give you cash back abroad gives you some cashback or limited cashback on UK spending. Both can be done without a hard credit check. Both obviously because there's no overdraft facility, you can't be charged interest on spending and ATM withdrawals , both will allow you fee free ATM with cash withdrawals, although trading two hundred two is quite limited . It's four hundred pounds a month, chase is fifteen hundred pounds a month. Compare that to Barclay card that's five hundred pounds a day so you can get a lot more there. And while they don't have section seventy five protection that I talked about on the credit cards earlier, they do have chargeback protection. It's a lesser protection, but it still could help. Those are the easy stand alone cards. You've also got First Direct and Santander and Lloyd's, which all if you switch to them, will be giving you bank we talked about bank switching last week so I'm not going to go into detail. You know one hundred seventy five quid, two hundred quid for switching to them and they also have near perfect exchange rate debit cards too, but for those you would have to switch bank account. I might do a few more of these on the pod. Okay, but it's time to ask you some questions Adrian a. Let's play it Welcome to Money Mastermind Adrian. I am delighted. Last week you got the question right, which means the score stands at you've got nineteen right and thirty seven wrong in this three option multiple choice quiz, which means after a long time I can finally say you are doing R C Very just slightly better than random chance. Okay , you're doing it, you've got the well done. You got I even saw a smile there. Did you just smile? It was a wan it was a wan wintry kind of smile take it. I love that you've said this is a hard one because it's like going , you know, it's like going it's like a team going away to play man city when they're in full flow and you think, well, it doesn't matter no expectations, it doesn't matter if we lose. So I feel relaxed. Let's see. Hollywood doing very well today, are we all working in working through the question, Adrian, you've gone into a shop and you bought yourself a brand new tablet. Not a statin nor a Viagra. We're talking a twelve inch, a digital monitor type tablet. And as Luck would have it with the tablet, the retailer had a promo that you get a totally free fitness tracker too. How exciting ? You plan to get more steps than the nineties pop band reunion tour . Sadly though, tragedy strikes sorry, I enjoyed that As your tracker is faulty and resets every time you hit a hundred steps . So here's the question five, six, seven, eight . Normally that's my last step reference. Normally the rule for faulty items is if you return it within thirty days you can demand a full refund . Yet here the tracker was a free add on, so I'm going to give you three legal rights . I want you to tell me the last one that is true . So it's either just the first is true or the first two are true or all three are true. You see what I mean? You're messy with my mind here, right? Come on. Yeah. So the first one is you can reject the tracker for a full refund of what you paid , but as it was free, frustratingly that's nothing . Okay ? The second one is you can get a refund for the effective commercial value of the tracker . The third one is you can legally get a full refund for the whole thing, the tablet and the tracker. So either just the first is true or the first and second is true or the first, second and third is true. Now I need to be straight with you, listeners . This is a slight gray area that can be disputed. So we are going with the Gold Standard ruling, which is specifically retired district judge Stephen Gold, author of Gold's L aw ruling, who I consulted on this. So we are going with his answer. So it's the Gold ruling. He also may well be my mother in law's partner . So it's a family ruling, if you like . Do you understand? First one reject the tracker for a full refund but there's no of what you paid but you didn't pay anything . Second one you can reject the tracker for a full refund of the effective commercial value of the tracker . Third , you can legally get a full refund on the whole thing the tablet and the tracker. You're missing out the most the most obvious remedy, which is to give you a new tracker, which actually works Well, you could ask for a repair or replacement, but as it's within thirty days, you have refund rights. So I want to know which of these three you could do. But you are right, you could ask for a new tracker. Absolutely. . , so name, but generally within thirty days you're entitled to refund. After thirty days, it lowers to a repair or replacement or partial refund ? I think improbably , but I think it's probably all three. I think there's a logic when you think about it saying well you might have bought that tablet in the first place because you were attracted by the free fitness tracker . So once the fit and that was part of the package so if the part so it's one whole basically and if any part of it isn't working. So to all intense to purpose it's like one button not working on the table t . Yeah, part of the tablet is a word part. So I would say all three apply. So now what I'd like, if you're at home, I'd like you just to say out loud so that you're locking yourself in what your answer to this question is now Adrian, are you logging in? A, you can reject the tracker for a full refund, but it's free B. You can do that and you could get the effective commercial value of the tracker or C, you can legally get a full refund on the whole thing, the tablet and the tracker. I'm saying all three. It's locked in even though it's wrong because you're all chirpy. I can hear it in your voice that I'm not correct. I want you to succeed. Okay, I think it's all three years. It's see. Adrian's locked in. There's our tension bed . So Adrian , you can reject the tracker for a full refund , but as it was free, frustratingly, that is nothing. So that's a pretty worthless option I had thought that the answer beforehand, I was with you, that it was sick because I would say this is part of the complete package . But retired district judge Stephen Gold says he believes generally this would be done as a separable contract so there are effectively two different contracts to the two items and therefore I'm afraid C is wrong so if I get repeating if I get another judge to say something different, can I have the point back next week? Sorry, what's that? Can I have the point back next week if I find another judge who said something different? No you can't back I just need to explain but, he would argue str ongly that you could get the effective commercial value off the tracker. So the podcast is video fine. We got it . Right, so we've just finished the five live recording and I was crushing up close to the new s so didn't get time to properly explain this rather complicated mastermind answer . And of course, remember that some of this is the interpretation of Judge Gold, so I'm going to explain it his way. When I discussed it with him, he said because it wasn't a question of this was a tablet that was bought to facilitate use of the fitness tracker. They were two different deals . They would probably most likely be structured as sever able contracts. So they're two different contracts within the same purchase . And therefore , it would be very difficult to demand that the tablet was faulty because the fitness tracker was faulty when they were separate contracts in effect . However , he then went on to argue because the offer of the fitness tracker was material in your purchasing decision, it was a part of the reason that you purchased it, and that track er was faulty, then you would have a right to demand a refund for the effective commercial value of the tracker. Now the phrasing here is crucial. You would have a right to demand it. My suspicion in practice is the shop would say no and the store would say absolutely not, this was a free tracker. We would give you a replacement. We're not giving you a refund of the tracker. So ultimately, as is always the problem with consumer rights law, to enforce that you would, need to go to court and get a judge to rule on it. Now if he wasn't retired and you were sitting in front of him, you went to Judge Gold, what he's effectively saying and of course it depends on the exact structure is he would say that you were entitled to a commercial refund , but another judge may take a different decision. So I thought it was a fascinating question, a legal gray area when I made it up and I wanted to know what the answer was, and what I found out is, well, I've given you one answer, but Adrian was probably right. There is always a chance a different judge would give you a different answer. So probably the easiest thing to do in practice exactly as he said would be to simply say, can I have a new fitness tracker, please, this one's broken . Now so as with pod only, I'm joined by PPS podcast producer Simon, hi, Simon, how are you doing? I'm excellent. Thank you. Delight to be here. And you've moved house and you've survived it. I moved house. I went on holiday. It's all going well. I'll tell you something about the new house that you'll enjoy. Yeah. So we've now got a garage and I've never had a garage before. I'm even certain how to pronounced it. And my big court my big contribution is that I've kind of nailed a cricket ball on a piece of string to sort of like the roof at the back of it so I can now practice my batting . Well, considering I saw the scorecard of your last batting and let's just say you didn't trouble the scorers even a little bit. I mean, they didn't have to move the score for you at all. I mean, you quacked. Well, aw fully . I've played I've played another game since then I got another third ball duck. I wasn't even gonna bring it up. I felt awful. Okay. So I've played twice. I've not scored a single run yet this season. Okay, well let's try and score a run in here. Yes . We've got a few more questions I think on currency and spending abroad. Shall we do those? Yeah, we got one from David . He asks, Is it better to use cards or cash in America as I know they haven't embraced contactless payments like in the UK. And what is the best option for mobile, a bolt on or a second sim? Okay, so if you're going to the States, I would absolutely continue to use cards. Yes, you're right. You may not be able to beat them, but you can still pay with them and it's still pretty easy to do and they are absolutely ubiquitous there. Again, you need one of the specialist overseas cards. I've mentioned the Barclay card and the Trading two hundred one twenty. I've mentioned Chase. Any of those would do and of course trading two and chase are easier to get and can just be used as standalone or a first direct card or whatever one of the specialist ones is and I would be doing that abroad and if you want to get your cash out you could get your cash out that way too and it would be easier. I mean you have to think about tipping in the states where it all gets very confusing that they have service charges and then tips on top and it all does get difficult. But yeah, in the States I would, you know, when I've been, I find cards very easy to do when you're over there. As for mobiles , a bolt on or a second stim. I mean, it can be expensive in the states. It depends what particular package your network is on. I would probably be using an ESIM. So I'd be getting myself an ESIM for the states probably cost you about a ten or four ten gig s that would last a month . It's where it effectively nothing physical goes in your phone, but it redirects your data through the ESIM provider and then you can use WhatsApp and stuff when you're over there. And that's a very easy way to use a mobile when you're in the states. Some give better signals than others. I mean, the one advantage of an ESIM is if you get there and the signal is pants on the ESIM that you've chosen. Well you could ditch it for another one, just get yourself on WiFi, ditch it for another one and set up a new ESIM when you're there and it shouldn't be that difficult to use. Elizabeth wants to know I have both a fair FX and Caxon card. I'm planning a trip to New York in a few weeks. Should I stick with those or look for something else? Well they,'re both pretty good. They're prepayment cards where you load the card up with money in advance and you spend it. So slightly different to the debit and credit cards. Now the thing to watch generally with prepayment cards, the other good one is Revolut. The thing to watch generally with prepayment cards is Are you getting the rate on the day you spend or on the day you load? There are no negatives or positives involved in that. It's just worth understanding. So all the cards I've talked about before are rates on the day you spend. So remember I use my careful phrasing a hundred pounds worth of euros because a hundred pounds worth of euros changes well by the hour depending on exchange rates and movements and we don't know those exchange rates so, they are just about settling for today's exchange rate. Now what you can do with some prepayment cards and the way some work is they will give you the rate when you load up. So let's just play this through for a second . Imagine that three weeks before you went on holiday or three months before you went on holiday, you went and bought your euros on a card. It's a bit like going to a bureau de Change and buying your euros. You have just locked in that exchange rate . Now if the pound gets weaker so it buys less euros , you will do well . If the pound gets stronger so you could have bought more euros if you waited, you would lose. So you are effectively by locking in that rate , you're taking a little bit of a play on the currency exchange rates. And there's nothing wrong with doing that. It may well win for you. And you could argue you're doing the same if you use the cards that give you the rate on the day that you spend because it all depends on the on the day that you spend. So in practice those cards depending how they're structures are pretty good. They're both good overseas spending cards. But it's all about which rate you get. Now some people might say, Ah, you've just confused me totally, which one should I go for? Should I lock? Well, the first thing to say is if you like the rate at the moment and that would give you enable you to work on your budget, then locking in right now by getting it on the rate you load up the money, the exchange rate on the rate you load is nothing wrong with it. But one thing that you could do is hedge. You could do a bit of both. You could get a card or you could get cash that loads up your money now at today's exchange rate and for about half your spending and then for the other half you could use one of those cards that gives it you on the rate on the day and then you're getting if things do move you're getting somewhere in the middle a little bit of a safety way go through it. The problem is the only way to really know what would be best is to have a crystal ball . And they're not available at the moment. Well, they're just very expensive . I mean, I've got one, but I mean it stopped working and I tried, but I was outside the thirty days so I couldn't get a full refund . And carry on. Will I get any runs between now and the end of the season? Have you put that into your crystal ball yet? If you don't, I'll give you some emodia We had this question from Andrew. He's going to Bruges for a week and wondered as the BNB will be cheaper if he pays in cash euros, where is the place to get the cash England or in Bruges? So I sort of answered this with Adrian earlier. The safest place to get your self a decent rate of cash if you actually want cash is a Bureau de Change comparison site here before you go. But if you have a specialist overseas card , then it is getting it out of a cash machine once you arrive in Bruges, assuming that that cash machine doesn't have a big ATM charge. And even if it does have an ATM charge let's say of two or three euros and you're needing to get out six seven hundred , that's still probably cheaper because two euros on six seven hundred is not big. I mean, if it's two euros on fifty euros, that's a big charge. Two euros on six hundred euros, well, it's effectively depreciated across the whole value so it works. And a final one from Matthew, I have recently received a letter from one of my credit card providers inviting me to increase my credit limit from three thousand to four thousand nine hundred and fifty . It is a Halifax Clarity credit card and I only use it for spending when I'm abroad about once a year and not for everyday spending as it doesn't offer rewards that suit me compared to my other store credit card . My initial thought is to increase the credit limit as you never know what might happen when you're abroad, but how would this affect my eligib ility for borrowing on other products that I might use more frequently? What an interesting question, Matthew, and yes, you're using the Hanifax Clarity in exactly the right way. I said it earlier in the show credit scoring is art not science, so I'm going to give you a best guess answer rather than a firm answer. Interestingly , what you're actually describing in the way that you're assessed for credit when they look at your credit balances , you're not saying you would increase your debt, you're saying you increase the credit facility but not the actual borrowing because it sounds like you understand what you're doing. So increasing the debt would be a problem . You are actually arguably decreasing your credit utilization. So credit utilization is the proportion of your credit you're actually using. So if you have a bigger credit limit and the same amount of debt , you are decreasing your credit utilization, which is often a positive sign . So doing this perversely won't have a big impact . I think it'll either have very little impact at all or it could minorally improve your credit worthiness when you apply for other products. So I wouldn't be that bothered about it. What would hurt is if you get a five thousand pound credit limit and you're holding a balance at nearly five thousand pounds and your constant that would be a problem because then it's the debt and the increased debt that's the issue. The increased credit not being used that much can actually be very minorly beneficial for you and that I think is where we should end for today. So hopefully you've all got your direct debits to check. You'll be preparing your over seas spending cards to make sure you get maximum bang for your buck when you're away and you'll be looking at your children to see have you got any financial tips for me That is it for this week. We tend to put out a new episode every Thursday and Monday, which is our question time podcast, where you can ask me absolutely anything and everything open brackets within reason closed brackets. If you've enjoyed today, please tell your friends you've been listening to the Martin Lewis podcast and why not subscribe, then your pockets will be pleased with you. And if you haven't enjoyed it and you've been listening this long , I mean , I'm going to stop holding my tongue in the position I am. It's hurting again now. I'm going back to slurring and this is all your fault. I've worked this hard, I've kept going, I'm in pain and you didn't even enter it I got a pay So I'm gonna work Martin Lewis is the founder of money saving expert. com , but of course other consumer and price comparison websites are available. You can get in touch with Martin's podcast production team by emailing Martin Lewis podcast at bbc. co. uk. The offers and rates mentioned in the podcast are correct at the time of recording, however, if you are listening on demand, it's worth double checking as details can date. Remember to subscribe on BBC Sounds and leave us a review however you listen