Seven things to ditch in 2012

No one likes to get ripped-off. Unfortunately there are a number of financial products on the market that do precisely that. So here are seven financial products to ditch in the New Year!

1. Mobile phone insurance

If there’s one thing I really hate, it’s mobile phone insurance. You know how it goes – you order your new shiny phone, and then get coerced into signing up for insurance. After all, how would you cope if you were to lose or break your phone within months of owning it?

But mobile phone insurance is often overpriced – particularly if you take it out with your mobile phone provider. Not only that, but more often than not, your policy will be riddled with catches. So this means, should you need to make a claim, you’re likely to find it gets rejected.

What’s more, there’s an excess of around £15-25 attached to the insurance policy, so you need to decide whether you think this is really worth it.

You may also find you’re already covered under your home insurance policy anyway – so make sure you check.

2. Extended warranties

If you’ve bought any electrical goods over the festive period, or you’re hoping to purchase some in the New Year, watch out for extended warranties. Whenever you buy electrical goods, you’re bound to be offered an extended warranty and the sales assistant is likely to make it sound like you REALLY need it.

However, in reality, an extended warranty could cost you more than half of what you pay for the item itself. Not only that, but you could already be covered by a free manufacturer’s guarantee or your statutory rights under the Sale of Goods Act. And if you’ve paid by credit card, you may also be covered by Section 75 of the Consumer Credit Act. Finally, don’t forget to check your home insurance policy to see if that covers you too!

If you do really want to take out an extended warranty, however, you’re likely to find a better deal by taking out a standalone policy instead.

3. Store cards

I could go on about these ridiculous cards for hours. But I won’t. However, I am sick to the back teeth of being offered one every time I walk into a shop.

Offers of 10% off your purchase lure shoppers in, but if you sign up for one and then fail to pay off your store card debt in one go, you’ll be whacked in the face with a hefty interest rate – in some cases, as high as 30%. So if you have one, I say get rid!

4. ID theft insurance

ID theft insurance is another product banks like to try and flog you. With concerns about ID theft on the rise, banks have a habit of preying on your fears and trying to convince you that you need to take out insurance.

However, ID theft insurance doesn’t actually cover you for that much. More importantly, it doesn’t protect you against any financial loss you might suffer due to ID theft. What’s more, ID theft can be pretty expensive, so I’m just not convinced it’s worth it.

A better option is to take out protective registration which can be obtained separately through CIFAS for £12 + VAT a year.

5. Packaged current accounts

Now I’m not going to say that everyone should get rid of their packaged current account in 2012. Packaged current accounts can be worth it if you genuinely do make use of all the benefits – such as breakdown cover, travel insurance, mobile phone insurance and ID theft protection (ring any bells?). However, more often than not, packaged current accounts are a waste of money.

So it’s worth sitting down and taking the time to consider whether or not your current account is worth paying a monthly fee for. You need to consider whether the benefits on offer really suit your needs, or whether you could get a better deal on these insurance policies elsewhere. If it appears the benefits aren’t worth the monthly fee you’re paying, get rid of your account!

6. Rubbish savings accounts    

A New Year means a new start. So take a look at all of your savings accounts and find out what rate of interest you’re receiving.

Unfortunately, with bonus rates being a common theme for many easy access savings accounts these days, interest rates can change quite dramatically from one year to the next (usually by going down not up). As a result, you may find that your savings account is now paying next to nothing.

So if this is the case, make sure you ditch your rubbish savings account and take out a new one with a more competitive interest rate instead!

7. Structured products

Structured products can be very difficult to understand. In theory, they should allow you to benefit from the upside of the stock market, but protect your capital from the downside risk.

However, the guarantee that comes with them doesn’t always mean anything – as many savers found out with the collapse of Lehman’s in 2008. Lehman’s had underwritten numerous capital investments sold in the UK, but when it collapsed, thousands of investors lost their money.

Ultimately, if you don’t understand exactly how these products work, I’d steer well clear.

So if you have any of the seven financial products mentioned above, make 2012 the year to sort out your finances and ditch them for something better!

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