10 Financial Rip-Offs
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It makes sense to look into the details of a product before buying it - but that can be tricky when the headline reads one thing and the small print another.
Here are some examples of where products might not be everything they first appear to be:
1. PPI
Payment protection insurance, or PPI, is usually sold alongside a loan and can pay out extra money to cover monthly repayments if the borrower falls ill or gets the sack.
But PPI has been looked into recently by the Financial Services Authority (FSA) - the body in charge of policing the banks and other lenders - as some providers were not giving enough information about the cover to their customers.
The FSA found that many lenders do not tell clients what their PPI covers or even why they need to buy a particular policy in the first place.
Some PPI providers have stopped selling the insurance completely, while the FSA found others still weren't up to scratch and might still be letting employees sell PPI who haven't got any idea what it is or why it's useful.
2. Extended warranties
When you buy pricey electrical goods such as computers, TVs and digital cameras, you'll usually be offered an extended warranty at an extra cost - often when you're already at the till and just want to get out of the shop quickly.
But it might pay to stop and think, as statutory rights mean anything faulty should be repaired or replaced for free, notes Citizens Advice.
The advisory service adds that home insurance policies usually cover accidental breakages too, meaning extended warranties are a waste of money if you've got decent contents insurance.
Extra rules were brought in back in 2005 to try and stop customers being sold extended warranties they don't need.
Susan Marks, social policy officer at Citizens Advice, said at the time that members of the public "have a right to goods that work" without shelling out for a worthless warranty.
3. Mortgage exit fees
With interest rates higher than they've been in years and fixed-rate mortgage deals coming to an end, people might be looking to remortgage to save money.
But figures from mortgage broker John Charcol show it could be a costly move, as the average charge for quitting a mortgage before the end of the agreed period stood at £180 as of October 2007.
Other penalties, including early repayment charges and limits on paying off extra each month, are also sometimes made - trapping the homeowner into a deal for even longer.
Industry body the Council of Mortgage Lenders predicts that the number of repossessions in 2008 will be half as much again as in 2007 - with 45,000 families at risk of being made homeless.
4. Premium telephone numbers
Premium-rate phone lines have been hitting the headlines recently due to the investigation into phone-in scams operated by ITV and other channels.
An investigation carried out by Deloitte found that calls were taken sometimes when the competition had already closed, while some winners were picked without any calls being taken at all.
It's not just the TV channels who are raking it in on premium lines - you could find yourself faced with a premium-rate number the next time you call a company for help.
Virgin Media is an example of this, charging 25p a minute on top of a 10p connection fee - the company says that if a call goes on for more than 20 minutes, an employee will phone the customer back.
But that might not be much of a comfort when you're already a fiver into your phone bill.
5. 'Guaranteed' savings rates
Some savings accounts offer a 'guaranteed' interest rate, based on the Bank of England's base rate. And that's higher than it's been in years right now.
But the guarantee quite often includes a rule that the interest paid will always remain below the base rate and will actually go down if the rate drops in the future.
Linda McBain, head of banking at Investec Private Bank, points out the problem with this. "Why would anyone choose a rate which is guaranteed to be below the base rate-" she asks.
Ms McBain adds that there's often a 12-month limit on the rate anyway, meaning the saver must switch to a new account to carry on getting a decent amount of interest. 5. 'Guaranteed' savings rates
Some savings accounts offer a 'guaranteed' interest rate, based on the Bank of England's base rate. And that's higher than it's been in years right now.
But the guarantee quite often includes a rule that the interest paid will always remain below the base rate and will actually go down if the rate drops in the future.
Linda McBain, head of banking at Investec Private Bank, points out the problem with this. "Why would anyone choose a rate which is guaranteed to be below the base rate-" she asks.
Ms McBain adds that there's often a 12-month limit on the rate anyway, meaning the saver must switch to a new account to carry on getting a decent amount of interest.
6. Equity release
The elderly are often targeted by advertising campaigns telling them to "release the equity" held in their homes.
But Age Concern warns that in the case of home reversion plans, this actually means you've sold part of your house - meaning it can't be left in your will.
And the extra money that comes from equity release can even interfere with the benefits an elderly person receives, the charity advises.
Retirees are told to think about the overall effect on their finances to decide whether equity release is the best option - and if you are still unsure, it might not be such a good idea.
7. Stocks and shares Isas
Individual savings accounts (Isas) come in two 'flavours' - a cash version with a fixed interest rate, or stocks and shares Isas linked to the stock market.
But like any stocks, the second type may only earn money if the stock market goes up - and if share prices drop, you can actually lose money and end up with less than you deposited in the first place.
HM Revenue & Customs even goes so far as to carry a disclaimer on its website saying it won't guarantee that a stocks and shares Isa will make any money.
"You should always shop around for the Isa that will give you the best deal or is the most convenient," the government department advises.
8. Credit card cash advances
Some credit card providers will charge you for using your plastic to get some actual cash to spend - while some add a penalty rate of interest on the amount taken out, making things even more expensive.
One example is Saga, financial services provider to the over-50s, which charges a minimum of £2 or two per cent of the amount of the cash advance - whichever costs the most - on its Visa card.
As well as the one-off fee, customers are then hit with an interest rate of 21.9 per cent on that part of their credit card bill.
This is a fairly hefty five per cent higher than the card's headline rate.
9. Instant access savings
Some savings accounts offer 'instant access', meaning you can get at your money at short notice - but you could end up paying a steep price if you try and take your own money out of the account.
Halifax offers "instant access to your savings 24/7 with a cash card" on its Guaranteed Saver account.
But that only applies to the first four withdrawals, after which the amount of interest you get for your savings drops, according to the financial services provider.
And if the balance of the account dips below £2,500 at any point, the "guaranteed" interest rate on the account stops applying completely and you just get whatever the rate is on the standard instant access saver account at the time.
10. Current account charges
Current account charges could well be the issue claiming the most headlines at the moment due to the Office of Fair Trading (OFT) test case being fought out in the courts.
The industry body is trying to get an official decision on whether the banks can legally charge their customers for going overdrawn without permission.
According to the banks, once you've signed a contract agreeing to such fees, they can charge as much as the contract allows - but the OFT disagrees and a verdict is expected in early 2008.
In a related scam, the organisation reports that some people have been phoned by identity fraudsters claiming to be from the OFT asking for bank account details so charges can 'be refunded'.
But members of the public are told not to expect much money to appear back in their bank if they give out account details over the phone.
Here are some examples of where products might not be everything they first appear to be:
1. PPI
Payment protection insurance, or PPI, is usually sold alongside a loan and can pay out extra money to cover monthly repayments if the borrower falls ill or gets the sack.
But PPI has been looked into recently by the Financial Services Authority (FSA) - the body in charge of policing the banks and other lenders - as some providers were not giving enough information about the cover to their customers.
The FSA found that many lenders do not tell clients what their PPI covers or even why they need to buy a particular policy in the first place.
Some PPI providers have stopped selling the insurance completely, while the FSA found others still weren't up to scratch and might still be letting employees sell PPI who haven't got any idea what it is or why it's useful.
2. Extended warranties
When you buy pricey electrical goods such as computers, TVs and digital cameras, you'll usually be offered an extended warranty at an extra cost - often when you're already at the till and just want to get out of the shop quickly.
But it might pay to stop and think, as statutory rights mean anything faulty should be repaired or replaced for free, notes Citizens Advice.
The advisory service adds that home insurance policies usually cover accidental breakages too, meaning extended warranties are a waste of money if you've got decent contents insurance.
Extra rules were brought in back in 2005 to try and stop customers being sold extended warranties they don't need.
Susan Marks, social policy officer at Citizens Advice, said at the time that members of the public "have a right to goods that work" without shelling out for a worthless warranty.
3. Mortgage exit fees
With interest rates higher than they've been in years and fixed-rate mortgage deals coming to an end, people might be looking to remortgage to save money.
But figures from mortgage broker John Charcol show it could be a costly move, as the average charge for quitting a mortgage before the end of the agreed period stood at £180 as of October 2007.
Other penalties, including early repayment charges and limits on paying off extra each month, are also sometimes made - trapping the homeowner into a deal for even longer.
Industry body the Council of Mortgage Lenders predicts that the number of repossessions in 2008 will be half as much again as in 2007 - with 45,000 families at risk of being made homeless.
4. Premium telephone numbers
Premium-rate phone lines have been hitting the headlines recently due to the investigation into phone-in scams operated by ITV and other channels.
An investigation carried out by Deloitte found that calls were taken sometimes when the competition had already closed, while some winners were picked without any calls being taken at all.
It's not just the TV channels who are raking it in on premium lines - you could find yourself faced with a premium-rate number the next time you call a company for help.
Virgin Media is an example of this, charging 25p a minute on top of a 10p connection fee - the company says that if a call goes on for more than 20 minutes, an employee will phone the customer back.
But that might not be much of a comfort when you're already a fiver into your phone bill.
5. 'Guaranteed' savings rates
Some savings accounts offer a 'guaranteed' interest rate, based on the Bank of England's base rate. And that's higher than it's been in years right now.
But the guarantee quite often includes a rule that the interest paid will always remain below the base rate and will actually go down if the rate drops in the future.
Linda McBain, head of banking at Investec Private Bank, points out the problem with this. "Why would anyone choose a rate which is guaranteed to be below the base rate-" she asks.
Ms McBain adds that there's often a 12-month limit on the rate anyway, meaning the saver must switch to a new account to carry on getting a decent amount of interest. 5. 'Guaranteed' savings rates
Some savings accounts offer a 'guaranteed' interest rate, based on the Bank of England's base rate. And that's higher than it's been in years right now.
But the guarantee quite often includes a rule that the interest paid will always remain below the base rate and will actually go down if the rate drops in the future.
Linda McBain, head of banking at Investec Private Bank, points out the problem with this. "Why would anyone choose a rate which is guaranteed to be below the base rate-" she asks.
Ms McBain adds that there's often a 12-month limit on the rate anyway, meaning the saver must switch to a new account to carry on getting a decent amount of interest.
6. Equity release
The elderly are often targeted by advertising campaigns telling them to "release the equity" held in their homes.
But Age Concern warns that in the case of home reversion plans, this actually means you've sold part of your house - meaning it can't be left in your will.
And the extra money that comes from equity release can even interfere with the benefits an elderly person receives, the charity advises.
Retirees are told to think about the overall effect on their finances to decide whether equity release is the best option - and if you are still unsure, it might not be such a good idea.
7. Stocks and shares Isas
Individual savings accounts (Isas) come in two 'flavours' - a cash version with a fixed interest rate, or stocks and shares Isas linked to the stock market.
But like any stocks, the second type may only earn money if the stock market goes up - and if share prices drop, you can actually lose money and end up with less than you deposited in the first place.
HM Revenue & Customs even goes so far as to carry a disclaimer on its website saying it won't guarantee that a stocks and shares Isa will make any money.
"You should always shop around for the Isa that will give you the best deal or is the most convenient," the government department advises.
8. Credit card cash advances
Some credit card providers will charge you for using your plastic to get some actual cash to spend - while some add a penalty rate of interest on the amount taken out, making things even more expensive.
One example is Saga, financial services provider to the over-50s, which charges a minimum of £2 or two per cent of the amount of the cash advance - whichever costs the most - on its Visa card.
As well as the one-off fee, customers are then hit with an interest rate of 21.9 per cent on that part of their credit card bill.
This is a fairly hefty five per cent higher than the card's headline rate.
9. Instant access savings
Some savings accounts offer 'instant access', meaning you can get at your money at short notice - but you could end up paying a steep price if you try and take your own money out of the account.
Halifax offers "instant access to your savings 24/7 with a cash card" on its Guaranteed Saver account.
But that only applies to the first four withdrawals, after which the amount of interest you get for your savings drops, according to the financial services provider.
And if the balance of the account dips below £2,500 at any point, the "guaranteed" interest rate on the account stops applying completely and you just get whatever the rate is on the standard instant access saver account at the time.
10. Current account charges
Current account charges could well be the issue claiming the most headlines at the moment due to the Office of Fair Trading (OFT) test case being fought out in the courts.
The industry body is trying to get an official decision on whether the banks can legally charge their customers for going overdrawn without permission.
According to the banks, once you've signed a contract agreeing to such fees, they can charge as much as the contract allows - but the OFT disagrees and a verdict is expected in early 2008.
In a related scam, the organisation reports that some people have been phoned by identity fraudsters claiming to be from the OFT asking for bank account details so charges can 'be refunded'.
But members of the public are told not to expect much money to appear back in their bank if they give out account details over the phone.
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