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The Friday 5: financial services you shouldn't pay for
Look out for companies flogging products you can get for free.
by Michelle McGagh on Nov 16, 2012 at 11:50
Amid news a credit card insurer has been fined more than £10 million for mis-selling, the City regulator has warned it has got its eye on insurance policies that offer ‘little or no worth’ to consumers.
But shabby insurance isn’t the only way companies are making a fast buck out of something you can get completely free. Here’s a list of things you should never pay for:
1. Identity fraud insurance
This week the Financial Services Authority (FSA) fined Card Protection Plan (CCP) Group £10.5 million for the sale of two pretty useless products. The most useless of the two being identity fraud insurance. This insurance, costing £84 a year, was supposed to protect you if your details or cards are stolen and insure you against fraudulent transactions made on your account up to £100,000.
What CCP and other purveyors of this insurance don’t tell you is that you’re already covered for fraud on your card by your bank.
Unfortunately for banks, The Banking Code, a voluntary code of conduct which most banks are signed up to, says they have to refund customers’ money if it is taken fraudulently.
Some identity fraud insurance policies state that they can give details of any credit cards or bank accounts the fraudster has tried to open in your name if your details are stolen. However, if you are unlucky enough to be the victim of fraud you can easily access your credit report yourself – often for free or for a small fee.
2. Extended warranties
When you buy an electrical appliance, from a washing machine to a hoover, you will often receive a warranty from the manufacturer covering any breakdowns or faults for a specified time – typically a year.
After this year is over, however, the shops would like you to think you’re on your own and want to flog you an ‘extended warranty’, also known as 'service agreements' or 'support services'.
These warranties very rarely offer the same sort of cover as the original warranty, and can be pricey to take out. Consumer group Which? believes ‘they’re not worth the money’ as modern appliances are unlikely to break down a couple of years after purchase.
Do remember that consumers have the Sale of Goods Act on their side, which states that goods should be of ‘satisfactory quality’, meaning they shouldn’t break down as soon as you get them out of the box.
On a personal note, I have used the Sale of Goods Act successfully when an Apple product failed. My iPod broke after just 18 months so I took it back, quoting the Sale of Goods Act, and it was replaced with no questions asked!
3. Budgeting tools
If you're looking to take control of your finances you may be looking online for some whizzy budgeting tools to help you see where your money goes each month.
More about this:
More from us
- Credit card insurer fined £10.5m for six years of mis-selling
- Argos, Comet and Dixons vow to fix extended warranty market
- Always broke? Online money tools could tell you why
- Hiding credit card debts puts partners' credit ratings at risk
- A million more households sink into debt
- Ending free banking won't stop the mis-selling
- Why I won’t be sticking a credit card on my mobile
- Lloyds and Barclays top complaints list after PPI failures
What others are saying
- StepChange Debt Charity
- Citizens Advice
- Financial Ombudsman Service
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