1. Mobile phone insurance
One of my pet hates is mobile phone insurance. Admittedly, I know it works out well for some people, but overall, I can't help thinking it's a rip-off.
Mobile phone companies have a habit of coercing you into signing up for it whenever you take out a contract or get a new phone. But these policies are usually massively overpriced and riddled with catches, so that if you need to make a claim, more often than not your claim will be turned down.
If you are worried about losing or damaging your phone, it's worth checking your home insurance policy to see if it's covered instead.
2. Store cards
How many times over the past few months have you been offered a store card when you've been out shopping? Dozens I would imagine.
But the problem with store cards is that they entice you in with offers of 10% off and special member events, and then when you've spent a decent amount of money on the card and realise you can't afford to pay your bill in one go, you get hit with hefty interest rates. These rates can be as high as 30% so don't use one unless you can guarantee you will ALWAYS pay off your bill in full each month.
This goes for any other credit card that has a high rate of interest. If you know you won't be able to afford to clear your balance in full each month, you should use a 0% on new purchases credit card. The M&S Credit Card, for example, offers a market leading 15 months interest-free spending! You will also earn M&S reward points.
Alternatively, the Tesco Clubcard Credit Card offers 13 months at 0% interest on purchases, and you'll also earn Clubcard points as you spend.
Just make sure you pay off the balance in full before the interest-free period comes to an end.
3. Rubbish savings accounts
If you're trying to save (and we all know how hard that is in the current climate), make sure you're earning at least some interest on your savings.
Many savings accounts are now paying next to nothing in terms of interest — and if your account is one of those, you're effectively wasting money because you're saving without getting anything in return. So make sure you move your savings in to a better account and start earning some interest!
For example, the Nationwide MySave Online Plus Account is currently paying 2.95%, including a 1.41% bonus for 12 months. You only need £1 to open the account, but bear in mind you can only make one penalty-free withdrawal per year.
4. An expensive overdraft
If you're prone to slipping into the red, make sure you're not forking out stacks in interest for the privilege.
Some current accounts offer interest and fee-free overdrafts, so switch to one of these instead. For example, the new Santander Preferred Current Account offers a 0% overdraft for 12 months. And Santander says it will match your previous overdraft up to £5,000.
You'll also receive £100 cash if you apply for this account and if you end up getting out of your overdraft, you'll earn 5% interest (again for 12 months), up to balances of £2,500. Just bear in mind you will need to pay at least £1,000 into the account each month to qualify.
Alternatively, if you're happy with a smaller overdraft, you'll get a £250 interest-free overdraft with the First Direct 1st Account providing you pay £1,500 into the account each month or take out another First Direct product.
You'll also receive £100 for applying, and if you're not happy with the account within 12 months, you'll get another £100 to leave.
Get a better bank account
5. PPI
Payment protection insurance (PPI) is an optional insurance policy that's often sold alongside credit cards, personal loans and mortgages. It covers your repayments if you're unable to do so due to an accident, sickness or unemployment.
However, it's also a rip-off and is oversold and overpriced. As a result, the Financial Services Authority has been forced to step in and ensure policies are sold fairly from now on.
6. Extended warranties
Shop assistants are forever offering extended warranties if you're buying electrical goods. The idea behind them is that they provide around three to five years of cover, during which the good working order of an appliance remains the retailer's responsibility.
However, it could cost you more than half what you pay for the appliance itself. Plus, it's worth noting that the item 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 if you've paid by credit card, or your home insurance policy.
Personally, I think extended warranties are a waste of money. But if you do want one, doing some of your own research could mean you'll find a better deal than the one offered to you in the shop.
7. ID theft insurance
If you've ever phoned up your bank to report dodgy activity on your account, you're bound to have been offered identity theft insurance.
However, this insurance won't protect you against any financial loss you might suffer as a result of ID theft, and as a result, I can't see the point of it. A better option is protective registration from CIFAS that costs £14.10 a year.
8. Packaged current accounts
I've never been a fan of packaged current accounts. These accounts require you to pay a monthly fee in return for getting so-called perks such as car breakdown cover and travel insurance.
But unless you can guarantee you're going to make good use of these perks, I think you're probably throwing money down the drain. In my opinion, you'd be much better off going for a free current account and shopping around for breakdown cover and travel insurance yourself!
Compare travel insurance deals online
9. Boiler breakdown cover
I also think boiler breakdown cover is a waste of money. Typically, it costs between £100 and £200 per year, depending on how much cover you want. And again, the policies are often riddled with catches.
An alternative, and one which I think offers much better value for money, is Home Emergency Cover. You can add this cover onto your existing home insurance policy and it's generally much cheaper. What's more, it will cover you for a boiler breakdown and heating failure, as well as roofing problems, plumbing problems and failure of the gas, electricity and hot water systems.
10. GAP insurance
Finally, GAP or Guaranteed Asset Protection insurance is a very expensive add-on that you might be offered if you're buying a new car on finance.
The idea behind it is to offer you protection if your vehicle is stolen, damaged by fire or written off, and it covers the difference between the payout you receive from your insurer and the settlement figure on your car finance agreement.
However, premiums are unnecessarily high and I think this insurance is well worth avoiding — although if you do want to take it out, make sure you shop around and do some of your own research to see if you can get a better deal.
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