Serena Cowdy writes about four financial rip-offs.
This article was first sent to readers as an email in our 'Afternoon' series.
Earlier this year, consumers struck another welcome blow in the battle against rip-off payment protection insurance (PPI). To find out all about it, read this article, by my colleague Cliff D'Arcy.
Unfortunately, there are still many other rip-off financial practices that are alive and well and doing us out of millions of pounds every year.
Here are four that really get my goat.
Secured loans
In a nutshell, this sort of personal loan is secured against your home. This means you could lose the roof over your head if you fail to make all the repayments - a terrifiying prospect.
In my opinion, you should steer well clear of secured loans if at all possible. Many providers market these products in a highly irresponsible fashion, painting a picture of luxury and financial freedom that is unrealistic and misleading.
And remember, loans can be secured against things other than your home. Read Avoid This Enormous APR! to find out about loans secured against your car that charge as much as 437% APR. Eeek!
What can I do? If you need to take out a loan, read this article by my colleague Cliff D'Arcy. He outlines why taking out an unsecured personal loan - or remortgaging - could be the way forward.
For small amounts, a credit card that charges 0% interest on new spending might be a good option instead. Just make sure you can clear the balance before the 0% period comes to an end.
ATMs that charge
Don't make the mistake of using that convenient ATM installed in your nice friendly local shop. Most of these commercial cash machines charge through the nose for withdrawing money.
Fair play to small shopkeepers - they've found a way of making extra cash out of hurried, careless and (very often) worse-for-wear customers.
But keep your wits about you and don't touch these machines with a bargepole. You'll usually be charged £1.50-£2, just for withdrawing a tenner. Find a bank instead!
Extended warranties
I'm always amazed by the tactics employed to try and sell me extended warranties.
The salesperson spends ages trying to convince me that the kettle/CD player/camera I'm considering is extremely reliable. `Ah yes madam, you're paying for quality here! You won't have any problems with THIS brand!' - and so on.
If I decide to go for said product, I'm then hit with the extended warranty spiel, which hammers home just how absolutely crucial it is to have an extended warranty - in case the thing breaks down in the next few months.
Huh?
In reality, extended warranties are often hugely overpriced and bad value for money. And although they cover product breakdown, they don't insure against the far more likely eventuality of me dropping the thing or running it over with the hoover.
Mobile phone insurance
The mobile phone insurance sold by operators can cost £80 a year or even more. Here's why I think it's usually a total rip-off.
- You'll normally have to pay an excess when you claim;
- Many phones aren't even worth £80 (I know mine isn't);
- Some policies have so many exclusions that they end up being virtually worthless. For example, many don't cover wear and tear or mechanical failure, while others only pay out if your phone has been `forcibly removed' from you (rather than lost).
If you really want to take out phone insurance, you'll usually get a much better deal from a stand-alone insurer or via a home contents insurance policy.
Word count prevents me from covering all the financial rip-offs that bug me. Cash withdrawal credit card charges, overseas credit card charges, negative payment hierarchy, standard variable rate mortgages, mortgage arrangement and exit fees, store cards, credit card cheques. the list is depressingly long.
In a nutshell, keep your eyes peeled when choosing your next financial product. Do your research, compare all the products on the market and make sure you read that boring small print!
What do you think is the biggest rip-off associated with a financial product? Post your comments at the bottom of this article.