5 Finance products to avoid – and which ones to opt for


Some commercial finance and domestic finance products are a must have. But it can be very confusing working out which products are worth spending your hard-earned cash on, and which are a waste of money. Sometimes the small print catches you out, and sometimes the product is just taking money that could be better spent elsewhere. In both cases, it’s wise to avoid them in order to protect your financial health.

So here is our advice on which products to think twice about taking out:

1. Expensive whole life insurance

There are times when buying extensive whole life insurance makes sense. However, often whole life insurance is sold to people who do not really need it. Agents, on commission for selling these types of policies, tend to sell them to people who would be better suited by cheaper coverage.

In many cases, it would be better to save up your money for retirement rather than spend a lot of money on overpriced whole life insurance. The people who gain from these whole life insurance policies are those selling them. Instead, choose a term life insurance policy which just happens to be so much cheaper.

2. Store card credit cards

These are credit cards that are only used at the store where you signed up for them. These credit cards encourage spending, especially as they often come with promotional rates for shopping in the store. Signing up for these credit cards is enticing and some stores will even give you a hefty discount on the day that you sign up as an extra incentive.

It is not be advisable to sign up. The interest rates on store cards can reach as high as 30% and they normally have extra charges if you miss a payment or if you go over your limit. This could affect your credit score and it would be better to sign up for credit cards that can be used all over the place. Their internal control is better and their rates usually average 18.9% which is obviously better.

3. Mobile phone cover

Every year, very many phones are lost or stolen. It is common for phones to be left unattended in bars and pubs where they subsequently end up stolen. Although it can therefore seem like a sensible move to take out mobile phone insurance, it can actually turn out to be a terrible waste of money. Many of these types of cover plans come riddled with exclusions which make it almost impossible to claim in the event you should need to.

A good idea is to check if the smartphone you are using can be covered by your home insurance, for use outside your house. Or find an insurer you can trust and source quality cover so that you’re not wasting your money on a cover plan that won’t pay out.

4. ID theft cover

It is devastating to fall victim to ID theft. If your name has been used by criminals to obtain loans, credit cards, credit agreements or any other fraudulent use, it can really damage your credit rating. The purpose of ID theft insurance is to ensure that your good name is restored with the credit reference agencies in the event that you are a victim of fraud. It costs around £35 to £75 a year but there is another way. Instead of signing up to such policies, simply deal with the problem yourself.

It is crucial to know that in cases of fraud loss, your bank takes responsibility, meaning you can directly deal with them and arrange refunds yourself. You should keep an eye on your credit report so as to identify any fraud transactions in your name once you lose your ID. You can see a copy of your report using the credit reference agencies for only about £2, and then ask them to correct any errors that are left on your account.

5. Extended warranties

You should be very wary of taking out extended warranties when buying electrical appliances. These warranties serve the purpose of covering the cost of repairs in case anything goes wrong with the electrical items. The sales staff get paid commission to sell this cover so do not get tempted by the hard sell. This is because a warranty can at times cost as much as the product but a model can become obsolete very quickly as new technology advances.

It can be more advisable to replace a faulty item because it may turn out to be more economical. Goods are supposed to be fit to do the intended job, be of satisfactory quality and should last for a reasonable period of time.

There are plenty of great financial products available, but be sure that you’re getting the right policy or product for you.