Rip-offs alert: financial mistakes you should avoid
As the recession continues to hit, it would be wise to avoid rip-off practices like paying the minimum balance on your credit card or opting for costlier monthly instalment plans, writes Charlie Weston
DESPITE the fact that we are in recession, we are still being hit by aggressive commercial practices. Here is a selection of some of the biggest rip-offs since Jack, of 'Jack and the Beanstalk' fame, ended up being persuaded to sell his mother's cow for a few beans.
Unfortunately, for most of us, the measly few beans we get after the hard sell are unlikely to turn into a beanstalk with gold at the end of it.
So avoid these rip-offs.
Paying the minimum on your credit card
Households in financial difficulties have been found to be three times more likely to be only paying the minimum (which can be as low as 1pc with MBNA) on their card each month, according to the Law Reform Commission.
It will take 20 years to clear a €8,000 debt if you pay just 2.5pc of the outstanding balance every month. In that time you will have paid €6,000 in interest alone.
A recent survey carried out for the European Commission found that Irish current accounts were less transparent than the European average, with more complex pricing structures.
Make sure you use your current account in a way that keeps the costs down. To do this you should try and avoid using cheques, avoid asking for duplicate statements, and never allow a cheque to bounce as the fees associated with this are horrendous.
Also, check to see what you need to do to get free banking. Some banks will reduce the fees if you sign up for phone or internet banking.
Do not be tempted by extended warranties as the cost of a repair could be less than the price of a warranty.
Most importantly, make sure you are getting the best price that is available.
Consumers' organisations in Ireland and Britain have warned that while extended warranties can offer consumers peace of mind, they can come at a very high price.
Premiums for these extended warranties can sometimes cost as much as 50pc of the appliance's purchase price, according to the National Consumer Agency (NCA).
Some outlets have also been accused of using "dubious tactics" to push extended warranties on customers.
More shops are pushing extended warranties on to consumers in an attempt to make up for tighter profit margins.
Some shops pay their staff commission on each warranty policy they sell, and set minimum sales targets.
You should consider all the pros and cons before agreeing to this kind of insurance.
Before you pay more for an extended warranty, make sure your purchase is not already protected by the manufacturer's guarantee.
Many products include one of these for free. If so, you can rely on this guarantee instead of extended cover if the item breaks down within the guarantee period (typically 12 months).
Not protecting your personal data
The recession has brought scores of scam-merchants out from under the rocks. State body, the National Consumer Agency, warns that three-quarters of consumers have been targeted by a scam.
Research by the agency shows that one out of every five consumers has fallen victim to the scams -- they have either lost money or parted with valuable personal information.
All sorts of people get suckered in by scams. In the past two years, hundreds of Bank of Ireland customers got caught by a phishing scam.
Phishing is an email purporting to come from your bank or financial institution requesting you to enter your personal identification details on a website which is actually a copy of the real bank's website put together by the fraudsters to capture your details.
At the time of the BoI scam, this reporter spoke to more than two dozen people taken in by the scam. They ranged from university professors to mums working in the home, farmers, businessmen and office workers.
Paying by instalments
When taking out home, motor or other forms of insurance you are often offered the option of paying by instalment. Typically, you can pay in 10 "easy-to-pay instalments".
But paying by monthly instalments is essentially getting a loan from the insurance company for the year. And boy do insurers charge for this convenience.
A report from the NCA found that interest rates of 20pc were being imposed by insurance companies on motor cover for allowing consumers to pay in monthly instalments.
This means the cost of insuring a people carrier for a family will jump from €700 to €770 if you pay by instalment.
Pay in one lump sum if you can. If you do not have the money try and get a short-term loan from a credit union or family members to avoid the high interest associated with paying insurance by instalment.