Payment protection insurance (PPI) hit the headlines again recently after the regulator announced it is pushing ahead with a blanket time limit for making claims.
The Financial Conduct Authority has plans to set a 2018 deadline, and will make a final decision in February.
A multi-million campaign will warn customers of the cut-off point.
Seven warning signs that you need to get on top of your finances.
PPI was designed to cover someone’s debt repayments in case they were unable to work due to illness or redundancy.
However, there are lots of ways in which PPI may have been mis-sold to you. These include being unemployed, self-employed or retired at the time you took out insurance, or if you were told the cover was compulsory before you could be approved for credit.
Several years ago, the banks were ordered to repay those who were mis-sold this product.
In total, the industry has set aside more than £24 billion to compensate customers, making PPI the most expensive mis-selling scandal ever seen in the UK.
How to review your pensions.
Not all financial products are useful
The ongoing PPI scandal serves as a timely reminder that some of the financial products you can buy from banks, retailers and other providers might be a waste of money.
Here we take a look at some of the “not-so-useful” products you can potentially afford to ditch – or avoid taking out in the first place.
1. Store cards
The offer of a hefty upfront discount may tempt you into taking out a store card when you arrive at the checkout to buy goods, but before you do, you need to be aware that these cards come with eye-watering rates; these can be as high as 30%.
If you fail to clear the card before interest applies, you could be saddled with debt for years to come.
These cards are very profitable for the banks and retailers who offer them, but can offer a very bad deal for customers.
Only agree to take out one of these cards if you can be sure of repaying your card when your statement arrives; you should then close the account and cut up the card.
If you can’t guarantee to pay off the card in full, steer clear of these pieces of plastic altogether.
How to complain like an expert.
2. Packaged accounts
Packaged accounts are fee-charging current accounts which offer a range of benefits, including breakdown cover, travel cover, and gadget insurance.
Many people are attracted by these “added extras,” but you need to tread carefully, as costs could range up to £25 a month – and you may not be able to use all the benefits you are paying for. This could mean the account is a big waste of money.
In addition, some of the “perks” may come with restrictions; for example, the travel insurance may have a maximum age that can be as low as 65.
Before opening one of these accounts, you should work out if you are going to be better off opening a free current account, and then getting cheaper cover separately elsewhere.
Find out more about Saga's travel insurance for the over-50s.
3. Extended warranties
Extended warranties offer consumers the chance to protect their purchases in case an item breaks down or develops a technical fault beyond the manufacturer’s warranty.
These warranties are commonly sold with electrical appliances.
But while you may be tempted by the reassurance of one of these policies, it is important to realise they come with a hefty price tag, and can often represent poor value.
In some cases, a five-year extended warranty can cost almost as much as the product itself.
If you are tempted by one of these “peace of mind” policies you need to assess the cost and the likelihood of faults. You also need to bear in mind that these warranties can often duplicate manufacturer guarantees – plus some home insurance policies could offer similar protection.
In addition, the Consumer Rights Act 2015 is already on your side. This Act states that goods should be of satisfactory quality, fit to do the job intended, and last a reasonable length of time.
Under some circumstance, you may be legally allowed to return goods up to six years after you bought them.
With this in mind, you should think twice before parting with any cash.
Find out more about the new consumer rights protections.
4. ID theft cover
Many people are worried by the idea of someone stealing their identity, and prepared to pay money for a product known as “ID theft insurance”.
This product pledges to cover the cost of repairing a damaged credit report, and the time it takes to sort it out.
The problem is, this type of insurance is widely-regarded as over-priced and pretty useless – and commonly mis-sold.
The cover is often sold alongside credit cards, but many consumers do not realise they have it.
Equally, those that do many not realise that financial losses due to fraud are covered by their bank anyway.
Under current banking rules, you will only be liable for up to £50 of your losses – unless there is evidence you are acting with gross negligence. This should mean it is easy to claim back compensation.
All of this makes a strong case for giving ID theft cover a wide berth.
Eight signs that you have been a victim of identity theft.
5. Mobile phone insurance
If you’re the type of person who often loses your phone – or if you frequently drop it and damage it – you may think it’s vital to take out mobile phone cover.
The problem is, policies can be expensive, and you could pay up to £12 a month for this insurance, only to find that when you come to make a claim, your insurer rejects it
Policies are notorious for their exclusions, and many people complain about insurers refusing to pay out for claims – so you may want to think twice before signing up a policy.
Equally, if you have a high-value handset and feel this cover is definitely worth having, avoid add-on insurance from your network provider, and go for a standalone policy from an independent provider instead, as prices could be a lot cheaper.
Also note that mobile phones can be insured under home policies, so check if this is the case to avoid paying twice.
Find out more about Saga home insurance.
For more tips and useful information, browse our money articles.