There are plenty of financial products we can't live without, from current accounts and credit cards to car insurance and pensions. But there are also some you could probably do without because they don't offer anything you don't already have or are just not cost effective. Here are five financial products you should think twice about before buying.
1. Store cards
You'd do well to shop at a large high street retailer and not be asked whether you'd like a store card which is a shop-branded credit card. This can be tempting, especially if you're offered a sweetener, such as a discount or exclusive offers. However, these cards come with very high APRs, which you'll pay if you can't afford to clear your balance each month, so unless you are always on top of spending they are to be avoided.
2. Mobile phone insurance
Mobile phone insurance can cost anything from £12 to £300 a year which is a lot of money if you only have a cheap model or don't tend to lose things. Also, depending on what home contents insurance you have, you may already have adequate protection against the cost of replacing your handset. This isn't to say mobile phone insurance is always a waste of money. If you have the latest smartphone it might be worth considering, especially if you have to pay extra for accidental damage on your home insurance or policy excesses make it unlikely you'd ever lodge a claim.
3. Packaged bank accounts
With so many passwords to remember and different financial products to hold the attraction of an account that bunches together various useful elements all-in-one has an attraction. However, you have to pay for one, frequently at a rate of around £15 a month. Packaged accounts can work, providing you're likely to use the various components. The problem is you may not. Mobile phone cover may be useless (see above), while ‘free' travel insurance might not provide adequate protection, such as if you are aged 70 or 75 plus and the policy excludes you. In short, it could be better to buy each element separately.
4. Identity theft insurance
ID theft insurance is designed to offer peace of mind, but it doesn't really as you'll spend around £10 a year for cover you have through regulation. If your bank or credit card is used fraudulently your card provider will cover the losses. They can withhold the first £50 of any losses, but invariably waive this charge.
5. Extended warranties
Getting extra cover when you buy an expensive product, such as a TV or dishwasher, may make sense if the manufacturer or retailer's guarantee expires after a year or so. However, the £150 you could spend on a £499 washing machine for a five-year warranty could be money down the drain. If you find your purchase isn't of satisfactory quality, fit for purpose or doesn't last for a reasonable time, you can return it under the Sale of Goods Act 1979 and ask for a refund or replacement.
All information accurate at time of publication.
This article is provided by the Money Advice Service.
