The best ways to pay for your new car

Whatever effects Brexit or general global economic stagnation may be having, it would appear that the automotive industry in the UK is carrying on its merry way. I know that neither of those were a consideration for me last December when i decided to upgrade my 5-series, the only thing that i thought about before taking the plunge, were my own personal needs and my budget.

And i’ve just learned that because of people like me, the number of cars on our roads continues to enjoy year-on-year growth in the region of half a million, bringing the total to more than 30 million. Not sure if thats a good thing or a bad thing but it does make for staggering reading, particularly for a country which forks out such a huge amount for public transport infrastructure. That said, the reality is that, outside London and other major cities, a car is simply a necessity. If you’re someone who is looking to either buy a car, or at least looking to upgrade significantly, you may be wondering what the best way to finance this may be.

There are a number of popular options, each with their own merits. Here’s a bit of background to five of them, and, hopefully, learning a bit more about them may allow you to zero in on the most suitable path for you.

Savings

Nothing technical about this option. If you have the savings to cover the cost of your new car, it is a very appealing way to go. Bear in mind, that with interest rates on current and savings accounts bordering on the derisory, there isn’t an obvious opportunity cost either. The two most important considerations are simply whether the savings spent on paying for the car could have been better spent elsewhere, and also to ensure that it doesn’t leave you short of cash in the immediate future.

Lease

Car leasing effectively amounts to long-term rental. Contracts tend to be in the region of three years, and you’ll be liable only for the monthly payment you make (and additional extras like insurance). Maintenance costs are usually covered by the agreement, and monthly payments tend to be competitive. The only two important factors to consider are that there will be a mileage restriction, while at the end of the term, you won’t actually own the car, or have any equity thereof.

Personal Contract Purchase

This is essentially a form of leasing, and most differences are generally cosmetic. The crucial distinction between the two though is that with a personal contract purchase agreement, you will have the option of buying the car at the end of it via a so-called ‘balloon payment’.

Hire purchase

This is an increasingly-used financing method which involves the customer putting up a deposit at the start of the agreement – usually 10 per cent. Thereafter, you make monthly payments in a similar fashion to the two schemes above. The important thing to note here though is that you don’t actually assume ownership of the vehicle until the final payment has been made.

Personal loans

Many people are quick to lump the any upfront costs of a car on credit card, but it can be rather foolhardy, given the rates of interest involved. Some might cite the convenience involved, but these days acquiring finance via a personal loan is incredibly quick and easy. Most platforms and providers allow you to complete the process entirely online, and pay outs are swift. The kicker though is that this increasingly competitive market has driven APRs down, so, provided you are comfortable with the level of debt you are taking on, this can be a very attractive car finance option.

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A Quick Guide to Apple Pay

Apple Pay, a new payment solution from the tech giant behind the iPhone and iPad, has just launched. However, not everyone can use it and a lot of people simply aren’t sure exactly what it is or how it works. Here’s a quick guide to the essentials of Apple Pay:

What is Apple Pay?

Apple Pay is essentially a way of using your Apple device (phone, tablet or watch) in place of your physical card at participating retailers and on London’s transport network. Your card details are stored on the device, and payments made through Apple Pay will be charged to that card even if you don’t have it with you. It’s a useful backup if you forget your card, or a way to avoid bringing both your phone and your card out with you at the same time.

To use it, you simply hold your device over a reader just as you would when using a contactless card. At the same time, either press your device’s Touch ID sensor or, in the case of the Apple Watch, double-press the side button to confirm you want to make payment. You can also use Apple Pay to quickly pay for purchases made through certain apps. Spend limits are set by stores; many have no limit, while others only accept the new service for payments of up to £20.

1Is it Secure?

As long as Apple’s security promises are upheld, Apple Pay doesn’t seem excessively risky. It works much like a contactless card, but offers extra security over that payment method as it requires a fingerprint ID.Bear in mind, though, that anybody else whose fingerprint is registered on your device, such as a family member, could potentially use Apple Pay with your device as well. It is also more secure by virtue of the fact that only Apple actually accesses your card details, instead of every retailer you make a payment to.

If your device is stolen, then hopefully the need for a fingerprint ID will stop the thief running amok with Apple Pay. At the least, it seems unlikely that it would fail to at least buy you time to take further steps. The free “Find my iPhone” service allows you to wipe a stolen device remotely, including your card details. You can also remove cards from Apple Pay by logging into iCloud or asking your card provider.

Who can use it?

Arguably the biggest problem with Apple Pay at this early stage is the fact that many common cards are not compatible. Currently, the service can accept cards from:

  • Santander
  • Nationwide
  • RBS
  • Natwest
  • MBNA
  • American Express

Cards for HSBC and First Direct will be added to the service later this month, and Halifax, Lloyds Bank and TSB are also planned to follow in the Autumn. Other cards may be added in the future, but there are currently no firm plans.

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Renting Out a Property? The Financial Considerations

Although buy-to-let isn’t quite the “hot property” it was prior to the recent economic recession, there is still much interest in it. Indeed, with ever still property price rises combined with low interest rates on standard savings in the bank, many who have money to invest still see investment in property as the only way to go.

1

The foremost calculation in determining the profitability of a rental investment is calculating its rental yield – the amount of money that is received in rent in relation to the amount of money paid for the property. There are however, many considerations that potential and existing landlords fail to undertake which leaves them a much less clearer picture of the exact profitability of such investment. Here are some to consider:

Insurance:

Landlords must ensure that the property is insured correctly. The exact insured required (whether buildings, contents or both) depends on the property and its tenancy terms. This insurance can cost a few hundred pounds.

Legal Compliance:

Some legal requirements for landlords are one-off for each tenancy – such as the Tenancy Deposit Scheme. Some of the deposit schemes are free of charge for protecting the tenant’s security deposit, though many charge the landlord. Other legal requirements are ongoing, and require yearly spends on the part of the landlord, e.g. the annual Gas Safety Certificate. This must be carried out by qualified gas safe engineers and often costs around the £100 mark each time.

Property Repair and Maintenance:

There is a legal obligation under the Landlord and Tenant Act 1985 for landlords to maintain properties to a certain standard. This includes ensuring heating and boiler installations are working properly, as well the washing facilities in the property. Damage done by the tenant is not in the remit though any general repairs to the property are required and the landlord foots the bill.

Agency fees:

For those landlords who choose not to rent out and manage the property themselves, there is also the cost of using a letting agent’s services. They often charge a percentage of your annual rental income to let the property or to also manage the property and tenancy on a long-term basis too – though this is a good option to take if you can’t or don’t want to deal with managing the property yourself.

Do be careful of some agents who can charge large mark ups on contractor costs when it comes to repair or maintenance work. Also, for tenants it is very off-putting being charged re-let fees by an agent at the end of a tenancy period if they choose to continue their tenancy. Be very selective when choosing who to let your property with – research will pay off.

Empty periods:

It is best to try to keep tenants happy as high turnover rates mean properties can be left empty and therefore a loss of rental income for the landlord. Any empty periods will need to be factored into costings.

Taxes due:

Landlords must declare the income they make to HMRC, and like all types of income it is subject to tax. Certain deductions can be made from the annual income received in rent.

 

These were some of the additional financial details that should be considered when investing in property for the rental market.

One very large consideration financially however, which has not been looked at yet, is the long-term consideration – capital growth on the value of the property. We all know the price of property has been going up over the years, and this trend, although slowing, is set to continue for the foreseeable future.

Growth is not the same in every part of the country and varies region to region and area to area, and this growth, long-term, is key to property investment being so in demand. Researching and choosing an area carefully will pay off in the long-run. Castle Estates (South London), have noted, for example, that although an area like Wandsworth now has a lower rental yield of around 5% compared to the 7-8% it was 5 years prior (steeply rising property prices do affect the rental yield calculation), the planned development around the Ram Brewery area of Wandsworth Center which includes improved transport links mean that not only is there likely to be long-term tenant demand, but also continued capital gain on property value for that area.

Research and knowledge will ensure better informed choices, though it cannot be denied that for all the costs, property generally is still a lucrative business for landlords, and will probably continue to be so.

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“Deceptive” PayPal to Pay Over £16 Million Compensation

Prominent online payment system PayPal has agreed to pay compensation to customers worth a total of US$25 million (£16.1 million). The payment processing giant has received these penalties in the US for deception of customers.

PayPal, which has long been owned by eBay but recently became a separate company, agreed to make the compensation payments in order to settle the legal dispute at hand, but has not admitted to being at fault. The agreement must receive the approval of a judge before it is made legally binding.

According to a US government watchdog, the company is guilty of a number of offences including failing to properly handle disputes over bills. Most prominently, PayPal has been condemned for adding new members to a credit scheme, which is functionally similar to a credit card, without informing them that they were being signed up to this service.

The scheme in question is called PayPal Credit. It is a method of deferred payment, allowing people to pay for things within their available credit limit rather than with actual money and then repay over the following months, with interest charged monthly. In other words, it works very much like a credit card. However, it is exclusively available as a funding source for PayPal payments and therefore has no need of a physical card.

The accusation is that the company made signing up for PayPal Credit as well as for the standard payment processing service the default option for newly-joining members, and failed to make it clear that they were doing so.

As a result, according to US Consumer Financial Protection Bureau director Richard Cordray, “Tens of thousands of consumers who were attempting to enrol in a regular PayPal account or make an online purchase were signed up for the credit product without realising it.” Cordray went on to claim that many customers only found out that they had been signed up for Paypal Credit after being charged fees for late repayment or even receiving calls from debt collectors.

While the issue surrounding PayPal Credit has perhaps been the most prominent part of this case, it is certainly not the only accusation levelled at the company. Other wrongful practices of which PayPal has been accused include failing to properly post payments, mishandling customer disputes both with merchants and with the payment processing company itself, and failing to make good on advertised promises to provide credit towards purchases.

A statement from the company said that “PayPal Credit takes consumer protection very seriously,” and that “Our focus is on ease of use, clarity and providing high-quality products that are useful to consumers and are in compliance with applicable laws.”

UK customers, the company insists, have not been affected by the problems taking place in the US.

 

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SSE Becomes Fifth “Big Six” Company to Cut Gas Prices

SSE has now become the fifth of the “big six” energy suppliers to cut the price of domestic gas supply. This follows similar price cuts by British Gas, E.On, Scottish Power and Npower. EDF is now the only one of the “big six” to have not cut domestic gas prices, though this may just mean they will be the last company to announce price changes.

SSE is the name of a company that trades under a number of other names in different parts of the country. It may therefore be more familiar to consumers under names like Southern Electric, Scottish Hydro and Swalec. The company supplies both gas and electricity, and has roughly 8.7 million customers across the UK. It claims that around three million of those customers – on gas-only or variable dual-fuel tariffs – will benefit from the price cut.

The price cuts come as a result of cuts in wholesale prices, resulting in savings for the energy companies that can be passed on to the consumer. Following plummeting oil prices, the price of wholesale gas has also dropped significantly over the last few months.

As well as announcing cuts to prices, SSE has also said that its existing guarantee not to increase the price of gas or electricity within a certain period will be extended. This is likely to involve an extension of at least six months, which would make the guarantee valid until July 2016.

The company’s director of GB domestic, Steve Forbes, said “We were the only supplier to freeze prices and we promised we would cut them if we could; now we’re delivering on that promise with an average £28 reduction in gas bills.”

However, the energy companies that have so far cut prices have come under some criticism for the way these cuts have been implemented. In particular, they have been accused of making only “token” price cuts which fail to meaningfully pass on much larger savings to their consumers. Citizens Advice executive Gillian Guy, for instance, accused energy firms of carrying out “a phoney price war” and said that “Token energy price cuts to standard tariffs do not reflect the big savings that energy firms can pass on to households.”

Defending the decision not to cut prices further, SSE said that the wholesale cost of energy is “less than half of the typical household energy bill.” The company went on to say that “There are significant other costs within energy bills, including those relating to government-sponsored environmental and social policies and the roll-out of smart meters.”

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Understanding your personal debt could be half the battle

It’s a situation that none of us wish to find ourselves in, but with the country’s economy only just beginning to get back on its feet, people up and down the country of all financial backgrounds are still feeling the effects of the credit crunch.

Whether you’re struggling with mounting personal debt or you are a sole trader with creditors persistently chasing you, the good news is, help is available.

Before jumping to any conclusions about your current financial position, you must consider every available option to ensure that the decision you make is the right one for you. Even if your personal debts are seemingly overwhelming, bankruptcy does not have to be your only way out.

In some situations filing for bankruptcy may be the right choice but it does not mean that you no longer have to make payments towards your creditors. In fact, bankruptcy is likely to have serious implications on your future and is a decision that should not be taken lightly.

  • Your credit rating is likely to be severely affected
  • You will not be able to acquire credit of £500 or more without disclosing your bankruptcy
  • You can no longer act as director of a limited company
  • Assets such as your home and car could be at risk

So what alternatives are available?  Seeking the right advice is the best place to start – for example, you could seek insolvency advice from Wilson Field.  A free consultation with a licensed Insolvency Practitioner enables you to take a step back, study your finances, and make an informed decision on the best way for you to regain control.

An Individual Voluntary Arrangement or IVA is a formal agreement with all unsecured creditors that you owe money to. However unlike a (DMP) Debt Management Plan, an IVA is a legally binding agreement, meaning creditors cannot pursue any further legal action. In addition to this, once your proposals are approved, those creditors cannot contact you about payments or change their minds about the payment plan.

Interest and charges will be frozen, and bailiffs will be prevented from calling you. The IVA usually lasts for 5 years and the payments are agreed between you and your creditors.

So before throwing in the towel, make sure you seek free Insolvency advice and begin to regain control of your life and your finances.

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Withdrawing your Pension as a Cash Lump Sum

The 2014 Budget has brought about many changes, with arguably the most surprising being the financial freedom offered to those who retire.

From April 2015 people will be able to take their Pension any way they want. Gone is the need to buy an annuity (the perception that you needed to buy an annuity is wrong anyway – you never had to buy an annuity). You can take as much of your Pension as a taxable cash lump sum as you would like. That means you can take your total Pension savings as a taxable cash lump sum!

This has change has split opinion!

On the one side of the fence are people who believe that this financial freedom is irresponsible, that your pension should provide you with an income through retirement. They believe that taking it in one go and spending it could see you starved of an income in retirement and in the words of the Pensions Minister Steve Webb, people will now go out and spend their retirement savings on a Lamborghini!

But there are also those who think this is great news! The freedom to do what you want with your Pension savings has suddenly made saving for a Pension much more attractive, a very good thing as not enough people realise how important saving towards your retirement is.

It could also help people pay off their mortgages and any outstanding debt, allow people to go on that holiday they had always dreamed of, help put the Grandkids through school, buy a new car (though maybe not as lavish as a Lamborghini!) and many more great things.

The only downside is that those who want to retire have to wait a year for these rules to come into place!

However, there is one rule that could allow you to withdraw your total Pension as a cash lump sum BEFORE April 2015.

Trivial Commutation

The Pension Triviality rules state that if your TOTAL Pension savings are less than £30,000 you can withdraw them as a taxable cash lump sum, with 25% of it tax free.

This means that if you had £20,000 in a Personal Pension and a workplace Pension worth £12,000 you would not qualify as your total Pension savings would equal £32,000.

Before the 2014 Budget the limit used to be £18,000 not £30,000, though this positive change came into place on the 27th March 2014 – so you can take advantage of it now!

What this means

These new rules are potentially very beneficial for those with smaller Pension pots. However, it is important to note that taking all of your Pension may not be best for you and your situation, this is why financial advice is so important. It can also get very complicated – getting it wrong could also bring heavy fines!

Please note that the Budget brought about changes to several other rules that could allow you to withdraw your Pension before April 2015.

This article was a contribution from Increase Your Pension. You can find many more educational articles, guides, infographics and videos on increaseyourpension.co.uk too.

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Is Cash Going Out of Date?

Back in the day, the Queen was the only one with the luxury of not having to carry cash around with her. Whenever she got a hankering for a good smoky bacon crisp sandwich some subordinate or other would do the buying for her while the Queen stood, dignity intact, browsing in Morrison’s frozen food section. These days though, it seems no one carries cash. We’ve all moved on to plastic. With so many options available, including credit cards, debit cards, store cards and Christmas cards (not yet a currency, but still closely linked to the ancient barter system), few people bother with the actual pounds and pennies anymore. Moreover, cash in the wallet simply begs to be spent, while a payment card can restrict the temptation by lightening the pockets, helping you better manage your bank accounts.

To illustrate how in danger cash is, here are some facts and figures.

It seems cash has been in crisis mode since at least 2010. For it was in the summer of 2010 that debit card spending overtook the total spent in cash. Debit card spending came in at a tidy £272 billion with cash spending at £269 billion. It was a tight race, sure, but one that cash seemed destined to lose. Especially when you throw credit card spending into the mix, at that point the contest between cards and cash becomes pretty one sided. And debit card spending continues to grow. In 2012 debit cards were used to make 7.7 billion purchases, with the number of debit card holders increasing by around a million.

Of course, credit card use is on the up too. There are over 30 million credit card holders in the UK now. And the amount of credit card purchases is expected to rise to 3.5 billion by 2022 with total spend coming in at about £214 billion.

Still, credit and debit cards shouldn’t be feeling too smug. Just as it seems that they are about to be become the transaction kings (or to cast aside their current truce and engage in a vicious fight to the death) along comes the new pretender to the throne: contactless payments.

If carrying cash is too cumbersome and plastic is the practical alternative, how convenient would it be to carry nothing at all? Really convenient. OK, you’d need to have your mobile on you, but you’d have that anyway. Unless you forget it, then you might be in trouble.

The idea is that instead of carrying cards around with you every single place you go, taking up all that space and weighing you down like a dumbbell or a practically invisible feather, you just scan your phone (which is linked to your bank account) and the money disappears from your account. Like magic.

The technology has been around since 2007 and the time seems right for contactless payments to stake its claim as the undisputed king of paying for things. Especially when you consider just how smartphone crazy we all are in the UK – another excuse to use it more is always welcome. Credit and debit cards are getting in on the action in this arena though, with their own form of contactless payment where you can wave your card over a card reader, rather than using the more traditional chip and pin or swiping method. Still you’re not really fooling anyone; you still have to carry those pesky cards around. And if predictions are to be believed, the mobile payment is the only way to go. You can then say goodbye to all those dozens of coupons and points cards too – the mobile offering (namely Google wallet) will eventually encompass these too.

Only certain phones are enabled with the contactless payment option built-in, although there are all kinds of apps available to enable it on your click and talk device of choice. In fact, in a recent article in the Telegraph futurologist Peter Cochrane predicted that by 2020 cards could have disappeared completely as a payment device. Where physical cash will end up by the time 2020 comes around, well, that remains to be seen. The suspicion is that while cards might be king at the moment, cash will hang on in there in some form or other (probably just its current form), ultimately beating out card payments with its durability.

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How to Save Over £1,000 in Six Months

Saving money is actually easier than you think. Everyone needs to save in this tough economic climate and some of us are undertaking fresh measures to make ends meet. You may have taken on an extra job, sold your car or even downsized your accommodation and moved to a smaller place.

If you think carefully about your expenses though, you’ll find that you can actually save a large amount of money over six months if you focus on the smaller details.

Change your phone contract – £100

You can save massive amounts of money if you go with a bundle deal and pay for your TV, broadband and phone contract as one package. By doing this, you could save up to £200 a year – £100 in six months. Go to a phone provider store to view the SIM only deals, ASAP.

Don’t waste food – £200

Britain wastes an atrocious amount of food, something that is not only unethical, but stupidly costly as well. Experts estimate that British homes discard around £400 in food a year. If you have uneaten odds and ends, turn them into a stew or an omelette – it’s not so hard to do and will keep you from another trip to the supermarket for another few days. It all adds up.

Quit buying coffee every day – £285

Do the maths – £2.50 a day adds up to £285 in six months on coffee alone which is frankly shocking, when you think about it. It’s far more prudent to buy your own coffee and brew it at home. Get an insulated mug or flask and take yours to work instead of paying extortionate amounts for sub-par coffee from the overpriced chain coffee shop on the corner.

On your bike! – £180

Living in the big city isn’t exactly easy on your wallet in terms of getting around. Even going to see your friends tends to be a big spending decision in some cases. The average commuter burns £454 a year on fuel just travelling to work and back. If you subtract the costs of buying a bike you could save up to £360 a year, which works out to be £180 in six months. Oh – and you’ll get fitter, too.

Work out at home – £300

Gym memberships should be reserved for only the most dedicated. The majority of people, it seems, are guilty of being too keen and signing up for annual memberships, which they then never fulfil. If the average gym membership costs £50 a month, you could save £300 over six months by jogging in the park and doing your exercises at home – the end result will be the same, after all.

 

Six months later, and you’re £1,000 richer! Hopefully. On top of the above suggestions, there are even more ways you could cut back on your expenses, which include investing in energy-efficient kitchen appliances and light bulbs. If you feel like you’re burning too much cash, it’s time to review the smaller, hidden expenses in order to save.

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A Beginner’s Guide to Cash ISAs

Cash ISAs (Individual Savings Accounts) are savings accounts available to every UK citizen and Crown dependency aged 18 years or over which are exempt from income tax on the interest accrued. The 2013/14 tax free allowance is set by the UK Government for Cash ISAs is £5,760. This is the amount that you can deposit in an ISA over a single tax year. This allowance is reviewed by the Government annually.

Although there are other types of ISA available, such as the Stocks and Shares ISA, for the purposes of this guide we’re going to focus on the most common type of ISA; the Cash ISA.

Understanding how the Yearly Tax Free Allowance Works

Once you have met the yearly tax free allowance for any given year you may not add additional funds, even if you have previously withdrawn these funds. Once the money’s in, it’s best that it stays in. This means if you have £5,760 sat in an ISA and you withdraw £2,000 in September 2013, you will only be earning tax free interest on the remaining £3,760 until April 2014, at which point you can invest any amount that does not exceed the newly announced tax free allowance for 2014/15.

Some ISAs also come with penalties for early withdrawal and so it’s important to realise that ISAs are for long term savings and shouldn’t really be treated as easy access bank accounts (although many accounts offer more flexible withdrawal options). ISAs with penalty free withdrawals tend to offer lower interest rates than those that don’t though.

Many ISAs pay out bonuses after a year or more but these bonuses can often be one offs and so it’s important to keep shopping around to find the best ISA to put your money. You can take out one Cash ISA with one provider per tax year but you can hold funds in multiple ISAs at any one time.

Finding the Right Type of ISA for You

There are many types of ISA providers out there and finding the best ISA account will inevitably take a good deal of research and consideration. It’s important to first of all work out what kind of ISA will suit you. Do you want easy access to your money without incurring fees? Do you want to invest most or all of your yearly allowance in one go or do you wish to pay it in incrementally over the year?

There are two main types of Cash ISA that between them satisfy most types of saver. These are Fixed Rate and Regular Savings.

Fixed Rate Cash ISAs

A Fixed Rate Cash ISA offers a fixed rate of interest over a fixed period (usually a year). Depending on the terms and conditions of the account any withdrawal made during this period may cause the interest rate to drop to a lower rate and be backdated to the point at which the ISA was taken out.

Whilst some fixed rate ISAs will allow a minimal number of withdrawals (often one per year) it’s important to understand that the more access you have to your money the lower the interest rate will tend to be. With this in mind a fixed rate ISA should only be an option if you don’t think you’ll require urgent access to your savings in the immediate future.

Regular Savings Cash ISAs

Regular Savings ISAs allow savers to invest their yearly tax free allowance over the tax year in increments. As such these accounts are subject to lower overall interest rates due as the interest are dropped every month.

Let’s take an example: If you were to invest £480 in April (1/12th of your tax free allowance for 2013/14) then you would receive the full rate of interest for that month. When you came to invest another £480 in May however, you would only receive 11/12ths of the interest rate as there are now only 11 months remaining in the tax year. By March 2014 you’d only be earning 1/12th of the interest rate.

Like Fixed Rate ISAs, Regular Savings ISAs may incur a penalty if money is withdrawn over the year or they may have a withdrawal limit or a set notice period. Again, consider whether you require easy access to your money and most importantly of all, do your research.

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