5 great deals which actually rip you off!

Don't get caught out by these deals which claim to offer great value, but usually do the opposite.

When something looks too good to be true, you know you need to proceed with caution. This is particularly true when it comes to your money. Right now, there are plenty of financial deals which look very attractive and seemingly offer great value too. But if you only had the time to investigate more closely, you will find a nasty catch in the small print, waiting to trip you up.

Fortunately, I do have the time, so I'm going to look at five of the worst culprits now:

1. Packaged current accounts

The attraction:

Premium packaged current accounts offer exclusive benefits for a small monthly fee, supposedly saving you £££s.

The reality:

Last year, monthly fees for packaged current accounts cost £13.87 on average. So what do you get for your money?

Typically, you'll get free annual travel insurance, AA breakdown cover, mobile phone insurance and perhaps a small interest-free overdraft. So, if you don't drive, travel regularly or go in the red, a packaged current account will drain more than £165 out of your pocket each year for no good reason.

I really question whether mobile phone insurance is a worthwhile extra too because cover can be provided as part of your home insurance policy (although the protection may be slightly less comprehensive).

If you pay more, even more benefits may be included, such as ID theft protection or VIP access to airport lounges. But since your bank should be protecting your account anyway, I think this is an expensive rip-off. And personally, I live without airport lounge access if it costs £165 a year.

All-in-all, I seriously doubt the benefits gained will exceed the costs paid by the average account holder. And I don't like the idea of paying for banking when I can easily get it for free. Personally, I prefer no fee accounts such as the Alliance & Leicester Premier Direct account, which pays up to 6% in interest, or the Alliance & Leicester Premier account, which offers £100 cashback to new customers. Alternatively, the Halifax Reward Current Account, gives you £5 each month you pay in £1,000. These current accounts truly reward their customers - and cost absolutely nothing to open. 

Compare better current accounts here.

2. Budget airlines

The attraction:

Budget airlines are the cheapest way to fly to popular destinations.

The reality:

Budget airlines such as Ryanair, easyJet and FlyBe offer seemingly great deals on flights, but often you'll find extra charges are slapped on left, right and centre for things you would normally take for granted from a mainstream carrier.

Flights may look cheap on the surface but once you factor in baggage check-in fees, excess baggage fees (if you're not careful), credit or debit card booking fees and paid for an in flight meal and/or drinks, your bargain flight might not represent such great value after all. In fact, in the worst cases, all these extra charges could work out more costly than the basic price of the flight itself. Crazy!

The good news is, the Office of Fair Trading took action against 13 airlines back in 2007 over misleading holiday pricing - including well known brands such as easyjet, bmibaby, Ryanair and Aer Lingus. This means that, these days, the prices advertised across budget airline websites do now include all fixed, non-optional costs of the flight including taxes and airport fees. In fact, inclusion of these costs is now a legal requirement for budget airlines!

Having said that, the advertised price doesn't necessarily include the cost of voluntary extras such as baggage check-in fees which could bump up your costs significantly. So be on your look out. Take a look at Ryanair costs more than British Airways to find out more.

3. Short-term mortgages

The attraction:

Get the lowest ever monthly repayments on short-term fixed rate and tracker mortgages

The reality:

A whole crop of two-year fixed-rate and tracker mortgages are offering really attractive rates of well under 4%. I can totally understand why this might appeal to borrowers when the rates are so much lower than longer-term deals.

But there are two problems here: firstly, interest rates are currently as low as they're ever likely to be. If you took out a two-year deal now the chances are when the deal runs out, rates could be significantly higher than they are now, leaving you in payment shock.

Secondly, choosing a short deal means remortgaging more frequently and therefore paying extra costs such as mortgage administration exit fees and valuations repeatedly, as I explained in Avoid this massive mortgage mistake.

For my take on when rates could start to rise, take a look at What the future holds for interest rates.

If you need help with your mortgage or remortgage, speak to a lovemoney.com mortgage broker.

4. The Car Scrappage Scheme

The attraction:

Scrap your old banger and get £2,000 off a brand new car

The reality:

This scheme sounds like a fantastic idea in theory, but it was designed to help car manufacturers and dealerships not drivers like us.

In short, as long as your car is old enough (it now needs to be registered before 29 February 2000), you have a valid MOT and you have owned it for at least 12 months, the scheme offers £2,000 off a new car if you trade-in the old one. £1,000 will be deducted off the price by the dealer and another £1,000 by the manufacturer.

Sounds fair enough but drivers should think twice for diving in. Here's why:

You'll have to buy a brand new car to qualify. Do you really want or need a new car even with a £2,000 reduction? And the car must be bought from a participating dealer. Dealerships are often more expensive than say, car supermarkets which don't normally take part in the scheme.

There's also a risk dealers and manufacturers will remove their own discounts and replace them with the reduction from the government, so the consumer is actually no better off. And don't forget, brand new cars depreciate in value the second you drive away from the forecourt.

So you can see this scheme is not as great as it seems. Read Car scrappage scheme will cost you money to find out more.

5. ID theft protection

The attraction:

Protect yourself from fraudsters for just £5.99 a month

The reality:

ID theft is becoming a huge problem in the UK, so peace of mind for a few pounds a month seems like a real bargain. But if you ask me, this type of insurance is virtually worthless.

Your policy will provide you with 'benefits' such as free credit reports and alerts, help from an identity theft expert, passport and driving licence cover and insurance to cover the costs of restoring your identity. I think this type of protection is really over-priced for the minimal amount of cover it provides. Plus you can get access to your credit report for nothing right here at lovemoney.com.

But the worst thing is, ID theft policies don't cover you for financial loss as a result of fraud. To find out more read Avoid this expensive rip-off!

If you want to find out if a deal really is good value, or you want to warn other lovemoney.com readers about dodgy ones you've come across yourself, get over to Q&A and ask the lovemoney.com community what they think.

More: Watch out for this banking rip-off | 10 foolproof ways to avoid being scammed