There are many financial products you should never go near. Here are ten of the all-time worst.
If there was a 'most wanted' list for Britain's criminal financial products these ten would surely make an appearance right at the very top...
Insurances
1. Poor payment protection insurance (PPI)
PPI is one of the best-known rip-off products. In fact, it's so bad, the industry watchdog, the Financial Services Authority has been forced to step in to ensure polocies are sold fairly from now on. PPI - which covers the repayments on loans, credit cards and mortgages when you're unable to pay them yourself - has long been over-priced, over-sold and incredibly difficult to claim on successfully. In short, you don't need it.
2. Evil extended warranties
When it comes to poor value for money, extended warranties really take the biscuit. If you're buying electrical goods for your family this Christmas be very wary of sales assistants who offer you an extended warranty. It could cost you more than half what you pay for the item itself. Remember anything you buy may already be covered by a free manufacturer's guarantee, your statutory rights if the goods are faulty, Section 75 of the Consumer Credit Act or your home insurance policy. Read The classic Christmas con to find out more.
However, if you're thinking of paying for an extended warranty, doing some research yourself and shopping around could mean you'll find a far cheaper deal than the one offered to you in the shop. Plus, you might find that it's cheaper to cover more than one appliance at the same time. Warranty Direct, for example, will cover three items for around £10 a month. What's more, you can save an extra 10% if you use the online code RAOX108
3. Inferior ID theft insurance
Identity theft is a big concern for all of us, but policies which protect against it are quite frankly a waste of money. Plans cost around £60 to £80 a year and cover the cost of restoring your identity but, unbelievably, they don't actually cover you for financial loss.
If you think you might be at risk, it's much better value to pay for a protective registration from CIFAS, which costs £12 + VAT a year. Protective registration means a warning will be flagged up on your credit file so that banks or building societies will take extra precautions when credit is applied for in your name. Find out more in Avoid this expensive rip-off!
4. Ghastly GAP insurance
GAP or Guaranteed Asset Protection insurance is a hideously expensive add-on which you might be offered when you buy a car on finance. It provides protection if your vehicle is stolen, damaged by fire or written off, and covers the difference - or the GAP - between the payout you receive from your insurer and the settlement figure on your car finance agreement.
Premiums are far higher than they need to be and policies are often aggressively sold. Take a look at Another rip-off insurance to avoid.
5. Miserable mobile phone insurance
You'll see a common theme with bad insurance policies: they're all massively overpriced. It's no different with mobile phone insurance. If you pay for a standard insurance policy for a few years, you'll probably find you have already covered the replacement cost of your handset several times over.
If you're really worried about theft or damage to your phone, check it's covered by your home insurance policy instead.
Finally, if you need help with getting good value for money insurance policies, try our Slash your insurance costs goal.
Savings and investments
6. Scandalous structured products
The trouble with structured products is they're notoriously difficult to understand. These plans are supposed to allow you to benefit from the upside of the stock market, but protect your capital from the downside risk.
But the guarantee isn't always worth the paper it's written on. You only need to think back to the Lehman's collapse to see how quickly things can go very wrong. Lehman's had underwritten a number of capital secure investments sold in the UK. But when the investment bank went to the wall, thousands of investors' savings disappeared with it.
As a general rule if you don't understand how a product works, don't go near it.
7. Worrying with-profits
Never has a financial product fallen so spectacularly from grace than with-profits. Policies once flew off the shelves into the hands of risk-averse investors who were looking for all the thrills of the stock market, but none of the spills.
But it was all too good to be true. The returns were paid in the form of bonuses set by actuaries that had nothing to do with how well the underlying assets performed. Some of the growth was held back during the good years, so bonuses could keep being paid during the bad.
But bonus levels were repeatedly set too high leaving little in reserve when the stock market crashed over 2000 to 2003. Today, many investors are still stuck not only without profits, but with badly underperforming plans.
8. Pathetic premiums bonds
You may disagree, but I'm not a fan of savings products where there's a high chance you'll earn absolutely nothing. It's true your money will be safe in premiums bonds since National Savings & Investments is backed by HM Treasury, but I think that's where the benefits end.
Sure you might win the £1 million jackpot if you're exceptionally lucky, but you can't ignore the chances of winning zip. Find out more by taking a look at Why premium bonds don't make good savings accounts.
Credit
9. Scary store cards
Store cards are fine if you use them properly. That means paying your balance off in full each and every month. If you don't, expect to be hit with an enormous APR which is a whole lot more expensive than most credit cards.
If Christmas has to be on credit this year, think about using a 0% on purchases credit card instead. And make sure you repay your shopping bill before the interest-free period ends.
10. Shocking secured loans
Secured loans are for borrowers who need large amounts of credit - usually £25,000 plus. Borrowing is then secured against an asset - usually your home. That means, if you fall behind with your repayments, your home is at risk. As if that wasn't bad enough, secured loans are often more expensive than ordinary personal loans, while remortgaging may be a more effective way of resolving financial problems.
To find out more, take a look at Beware these high risk homeowner loans. And check out our video on debt advice for more guidance.
Finally, don't be too disheartened by all this talk of toxic products. There are plenty of decent ones out there too. You can check out the best at the lovemoney.com comparison centres. And, if you have a question about a dodgy plan or you just simply want to warn others, why not post on Q and A?