Six swindles to avoid

Watch out for these six swindles!

1) 'Alternative home insurance' fees

This delightful wheeze was invented by mortgage lenders in order to boost their profits from the sale of home insurance. Most mortgage lenders massively overcharge their customers for buildings and contents insurance. Naturally, many customers respond by shopping around for Best Buy policies. However, most mortgage lenders will charge a fee, usually around £25, if you don't buy their rip-off cover. Some even have the nerve to make this charge every year.

In theory, this fee covers the cost of checking your insurance policy to ensure that your replacement cover is up to scratch. In practice, lenders simply bank this cash and, at most, record a few policy details on their system. This is an outright con, in my view.

2) ‘No interest' savings accounts

An ‘easy access' savings account should provide just that: easy, no-strings access to your cash when you need it. However, a growing number of so-called easy-access accounts actually have a nasty sting in the tail. If you withdraw any amount in any particular month, then you earn no interest at all on your entire balance for that calendar month.

So, if you withdraw £1 and leave, say, £49,999 in your account, then you earn no interest whatsoever during that month. Therefore, each monthly withdrawal costs a twelfth of your annual interest rate. Hence, three withdrawals (in three different calendar months) per year will reduce your savings rate by a quarter, taking a rate of, say, 3% a year to a 2.25% a year.

3) 118 numbers (directory enquiries)

For 46 years, we Brits called a single number for directory enquiries: BT's 192 service. However, some bright spark thought it would be an excellent idea to expose BT's monopoly to market competition. Hence, in 2003, a whole host of competing 118 services were introduced by telecoms and other firms. Alas, the outcome was tiresomely predictable: forced to spend millions on advertising, these companies enormously increased the cost of directory enquiries.

Today, complicated connection and call-time charges now mean that it can cost over a pound to unearth a single telephone number! Our advice is simple: NEVER use rip-off 118 services; instead, try finding telephone numbers using Google or BT's online Phone Book.

4) Bogus jobs

Recently, we've seen heaps of dubious job adverts on the Web and in spam emails. One remarkable ad claims, "I earn £14,775 per week and so can you". Yeah, right! This amounts to a salary of almost £770,000 a year, the sort of money earned by top sportsmen, financiers and business folk.

In reality, these adverts promise the earth and deliver very little. Some rely on multi-level marketing techniques which appear to offer unlimited potential, but usually fall short. All these ads ask you to send money upfront to learn the ‘secrets' of success -- money which usually disappears into a black hole. If you really want a better-paid job, ask for a pay rise, get some career counselling, or visit well-known recruitment websites such as Fish4Jobs or Monster.

5) Customer helplines

If we have a problem with a product or service, then we want to contact someone who has the necessary expertise and customer-service skills to help us. Ideally, we'd like to call a freephone (0800) number, so we don't have to pay to sort out problems. Alas, customer service at many major businesses is woefully inadequate. Often, poorly trained (and poorly paid) workers keep customers hanging on premium-rate lines costing anything from 10p to £1.50 a minute.

Some of the worst offenders are media, Internet and technology firms, whose approach to customer service is often scandalously inept. We take a dim view of this approach here at lovemoney.com. The offending company never sees a penny of our hard-earned cash ever again!

6) Foreign-currency conversion fees

We Brits love to splash out on our credit cards, both at home and abroad. Indeed, credit cards account for around £12 billion a year of overseas spending. However, most holidaymakers and travellers are unaware of a hidden cost which bumps up the cost of paying for goods in currencies other than sterling. Alas, 99% of credit cards charge a handling fee of 2.75% of the value of non-sterling transactions, such as overseas purchases and transactions on foreign websites.

In total, these sneaky ‘currency conversion charges' cost us Brits around £300 million a year. To dodge foreign-currency loading fees, stick to using plastic cards which don't charge extra for non-sterling purchases. Best Buys in this category include credit cards issued by the Post Office and Nationwide BS.

Finally, we're not done with this theme yet, as there are plenty more dodgy deals left to expose. In the meantime, keep your wits about you and remember: if an offer looks too good to be true, then it usually is!

More: Fed up with rip-offs? Then find a better credit card, current account, mortgage and savings account today!