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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

The Friday 5: financial services you shouldn't pay for

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.

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13 comments so far. Why not have your say?

andrew sutherland

Nov 16, 2012 at 12:08

Number 3 - 'Budgeting Tools'

Seriously, do people pay for such things?! What's wrong with a free spreadsheet program or even a pen, paper and calculator/mental arithmetic?!

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Geoff James2

Nov 16, 2012 at 12:43

@andrew sutherland

Never unederestimate the poor level of maths in the UK general population. Budgeting takes maths AND structured thinking. I suspect if they could already do it on paper or on a spreadsheet, then they would have; and would not be the target market for the tools that are for sale.



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Nov 16, 2012 at 14:34

Geoff - so right! Startled last week. The early 50s nanny was having trouble helping the P6 kid with his homework. Didn't know how to get a sixth of something. So not just the younger generation. OK expectations low of someone paid £10/hr but it is scary.

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an elder one

Nov 16, 2012 at 15:03

The same underlying ignorance of basic maths, general gullibilty wishful thinking and an apparent total disregard for the basic law governing the balance of expenditure and revenue has helped to put us all in the mess we are in today.

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an elder one

Nov 16, 2012 at 15:06

and looking at the market today, boy, are we in a mess!

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Nov 16, 2012 at 18:39

" OK expectations low of someone paid £10/hr but it is scary."

£10 per hour is £400 per week for a 40 hour week! A damn sight more than I earned in an engineering factory and I was expected to work with sines, cosigns and tangents,convert from imperial to metric and work to within microns!

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an elder one

Nov 16, 2012 at 18:51

specifics have to be used in context, viz, when; I can remember a time when £1000.00/yr was deemed a modest fortune (early 1900s).

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Ken Howard

Nov 16, 2012 at 23:04

I remember looking at a friend's young son's homework and noticing that he had answered 1/6 + !/6 = 1/12...... and the teacher had ticked it "correct. I told him to point it out to the teacher. Next day he came back and said "Teacher says that's right." So I bought a Bar Six chocolate bar (remember them?) and demonstrated that 2 of the six pieces were actually 1/3 of the bar. He said I was wrong 'cos it was 2/6. And his mum said she didn't know the answer, teacher must be right. Sometimes you just can't win.

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Rod Homer

Nov 18, 2012 at 11:21

American Express have called me several times offering Identify fraud insurance at £8 per month. That is in addition to my £325 p.a. card fee! Glad to hear that it is a) useless and b) not necessary.

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Nov 18, 2012 at 12:53

If someone says they are prepared to get money for you , for anything,

go to the cupboard and take a large pinch of salt

Do you more good

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wayne roberts

Nov 18, 2012 at 16:58

Number 6: Financial advice / FSAs.

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George Kendall

Nov 19, 2012 at 02:33

It's funny. The textbooks and guidelines for advisers tell you you should be providing a fair service for a fair fee including debt/budgeting advice being the most important/first thing you should be covering. Then you get articles like this saying nobody should pay for that advice... Brilliant!

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Nov 19, 2012 at 04:42

Trust a Yankee company, Amereican Express, to charge a hefty annual fee and then have darn right cheek to add extra for identity fraud. It is the American way unfortuntely, that everything has a commercial value and that everyone is stupid! Why would you pay for an Ammex card in the first place?

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