Ignoring small print costs families £400 a year
The Money Advice Service (MAS) said 83 per cent of people north of the Border admitted they do not read the full terms when they take out a financial product such as a credit card, loan or insurance policy.
The UK-wide figure was £428, with 84 per cent failing to read the small print, according to a survey of 3,000 adults.
Some 452 of those surveyed said they had taken out a payday loan in the past and estimated that the average annual cost incurred by not reading or understanding financial terms and conditions properly was £1,405.
The MAS found that a lack of understanding of what key financial terms mean is making the problem worse.
Nearly half (46 per cent) of people did not know the meaning of compound interest.
Meanwhile, 44 per cent of people did not understand the term annuity (an annual income that people buy with their pension savings) and 30 per cent could not identify what APR stands for (annual percentage rate – it is used to calculate borrowing costs).
Among those who had taken out a payday loan, 64 per cent could not identify what APR stands for, while nearly a fifth (18 per cent) believed that when someone takes out a loan, there is no obligation to pay it back.
People living in the south-east of England thought they had lost the least amount of money over the last year through not reading, or by misunderstanding, financial terms, with an average estimate of £128 given.
Consumers in Northern Ireland believed they had lost the biggest amount over the last year, at £1,014 typically.
In Scotland, the average amount people thought they had lost out on was just below the UK average, at £384.
Jane Symonds, a money expert at the MAS, an independent body set up by government to offer financial tips, said: “Reading and understanding the terms and conditions of a financial product can seem long and unnecessary but, if you don’t, you may end up incurring unexpected penalties and possibly even impact your credit score.
“There are many ways in which you can lose money by not properly understanding terms and conditions. Early repayment charges on loans and mortgages are a common financial headache, and many people fall foul of penalties for taking savings money out early, or incur late repayment charges on credit cards.”
The MAS has a jargon quiz on its website to test whether or not your knowledge of financial terms is up to scratch. See www.moneyadviceservice.org.uk/en/tools/do-you-know-your-ear-from-your-elbow