Top ten list of useless financial products revealed by consumer organisation

News - Living

Written by Ray Clancy

Friday, 04 June 2010 10:30

People could be wasting thousands of pounds on financial products they simply don’t need, according to consumer champion Which?

Experts from the organisation have drawn up a list of top ten money products that are usually useless and in some cases, can leave people out of pocket or stuck with a poor credit rating.

Top of the useless list is mobile phone insurance. It can cost up to £100 a year and most people are already covered by their home insurance, Which? says.

Then come extended warranties. These are too expensive to ever be worthwhile and can cost up to half the cost of the product itself.

Structures products can be confusing, complex and costly and you are better putting money into an Isa, according to Which? It adds that the cost can be significant and around 6,000 people with a ‘structured product’ were left with nothing when Lehman Brothers collapsed in 2008.

Its report also highlights ID fraud cover as useless as it coasts about £70 a year and most losses will be met by your bank.

Payment protection insurance is described as over prices and Which? experts says that income protection is better value. They say that adding PPI to a £7,500 five year loan could cost an additional £2,000 to £3,000.

It describes secured loans as risky and advises people to only take out unsecured loans. The cost could be losing your home if you are unable to repay the loan.

Store cards have high interest rates, it says. Maintaining an average balance of £1,000 on a store card at 29.9% would cost you nearly £300 in interest over a year.

Debt management plans are also badly rates. ‘Ditch this expensive product and get free debt advice from CCCS, the National Debt Line or your local Citizens Advice Bureau,’ says Which? It says they can cost thousands over the medium to long term.

It also advises against With Profits products that can incur high charges. Invest in stocks and shares Isas instead, it says. If you’d invested £500 a year in a full cost with profits endowment over the past 10 years, you could have actually lost money, ending up with as little as £4,892.

Packaged accounts are often not worth the money and can cost up to £300 a year which Which? described as ‘a needless cost if you don’t use the extras and benefits of the accounts’.

‘Our research found that there’s a bunch of financial products on the market that most people really don’t need but this doesn't stop companies from trying to sell them. Don’t just follow what a salesman says, do your own research, speak to an independent financial adviser if you need expert help and make an informed decision about which financial products are right for you,’ a spokesman said.