Four financial products you shouldn't buy
While some financial products are absolute must-haves, others may simply be an expensive waste of your hard-earned cash! In my opinion, most people shouldn't bother with these four dodgy deals…
1. Identity theft insurance
I think identity (ID) theft insurance is, on the whole, a waste of money. The simple reason for this is that most policies will not cover the financial losses you may suffer if you become the victim of fraud.
On the other hand, as long as you can prove you did not act irresponsibly, your bank, building society or credit card provider should pay you back any cash that is stolen from you as the result of identity theft.
This might well leave you wondering why anyone would buy this insurance!
ID theft insurance generally offers benefits such as allowing you access to your credit report, which may be damaged if you are affected by fraud. It may also pay out for the inconvenience and hassle you suffer if your identity is stolen, especially if you have to take time off work.
However, don't forget you can access your credit report at any time, probably for free (to find out more read 'Six ways to improve your credit score').
Overall, I think this is another financial product it isn't worth paying for.
Remember, you can take steps to help protect you identity which won't cost you anything at all. Victoria Bischoff explains her top tips in 'Eight ways to protect your cash from fraudsters'.
2. Extended warranties
Whenever you buy a big ticket item such as a TV, washing machine or fridge, don't be surprised if you are offered an extended warranty that will 'guarantee' it for an additional length of time - probably between two and five years.
I can see why these warranties may be tempting; after all, if you are spending a lot of money on a single thing, it's natural to think about protecting your purchase.
However, it's crucial to be aware that extended warranties rarely cover accidental damage or wear and tear on goods. In other words, they are only likely to pay out if the item you've purchased stops working due to a mechanical fault.
In addition, extended warranties are often very expensive. They can even be more profitable for retailers than selling the items they are attached to - and may be so pricey that, when you work it out, paying for this 'insurance' could cost you almost as much as shelling out for a new version of your damaged product!
Most importantly, don't forget that whenever you buy an item, under the law it must last a reasonable amount of time.
If it doesn't, you'll be entitled to complain and have your item replaced, repaired or have your money refunded - warranty or no warranty!
3. Store cards
Store cards are, in my view, among the worst financial products out there.
The APRs charged on some dwarf even the most expensive credit card interest rates; the Topshop card, for example, charges a typical APR of 29.9% - almost sixty times the Bank of England base rate!
Store cards tend to come with tempting introductory offers - for example, '10% off all your purchases today'. However, if you do not pay off your card's total balance at the end of the month, the interest you'll be charged on your purchases is likely to massively outweigh the advantage of getting a few quid off at the cash desk!
With Britain still in recession, now is probably not the time to be spending money you don't have. However, if you must borrow, spending on a 0% purchases credit card is a far better way to do so than using a store card, as Victoria Bischoff explains in 'The cheapest way to borrow now'.
Alternatively, if you're able to pay off your card balance at the end of each month, why not consider ditching your store card for a cashback credit card?
You can learn more about the benefits of cashback credit cards in my article, 'Make free money with this clever credit card'.
4. An expensive packaged current account
Packaged current accounts are often dressed up with posh-sounding names and exclusive extras, but many also come with hefty monthly fees and paltry in-credit interest rates.
And while the add-ons that come with packaged current accounts (such as travel insurance, identity theft cover and gadget insurance) may seem to justify their price, it's important to ask yourself: how many of them do you make full use of?
What's more, it's worth considering how much your packaged account's useful features would cost you if you shopped around for the cheapest offers and bought them individually.
In my opinion, anyone currently paying for a packaged current account should look carefully at how much it's costing and whether it represents value for money.
A better deal…
Right now, you could get a fantastic £100 bonus by signing up and switching your direct debits to the Alliance & Leicester Premier Current Account. The account pays 0.50% AER on balances up to £2,500, comes with a 0% EAR overdraft for 12 months (depending on your circumstances) and requires that you pay in a minimum of £500 per month.
**This material is for information purposes only and should not be considered financial advice. We strongly encourage our readers not to rely solely on this content, but to seek independent advice when making financial decisions.**
Categories
