Top 10 financial products to avoid in 2014We reveal the products you're better off without

14 December 2013

Financial products you don't need

Which? takes a look at the top 10 money-wasting financial products that we think you're better off without. 

With the cost of living putting pressure on many households' budgets, it's more important than ever that consumers are buying financial products that are good value for money.

Which executive director, Richard Lloyd said: 'There are still far too many financial products on the market that are risky or offer poor value for money and some that are being mis-sold to consumers. 

'We want the financial regulator to take tough action and crackdown where it finds evidence of poor practice.'

Here are the top ten financial products to avoid.

1) Extended warranties

What's the problem? Many electrical products are already covered by a manufacturer's warranty, the Sale of Goods Act, or home insurance. Extended warranties can be expensive compared to the cost of the item you're insuring. A previous Which? investigation found that some staff made exaggerated claims about what was covered.

Your rights: Find out more about your automatic rights if you have a faulty product and how to claim under the Sale of Goods Act. Read our guide to what to do if you have a faulty product

2) Charity credit cards

What's the problem? These are not the most efficient way to donate to a cause. You would need to spend £129,600 on a typical charity credit card in just a year to donate the average given to charity by UK donors (£27 a month). You'd be able to give more by taking out a top cashback credit card and donating the cashback, if you spend £500 a month.

Take action: Consider taking out a top cashback credit card and donating the money you get in cashback. Though a charity credit card will donate automatically you can give more if you are willing to donate the cashback yourself. Find out more about how to get the best cashback credit card deals

3) Gift cards or vouchers

What's the problem? If the company goes bust there's no guarantee consumers will still be able to use them, so - if you're buying vouchers of a high-value, or from a retailer you're not confident in - cash or cheque may be a safer bet.

Your rights: If you have vouchers for a company that's gone bust you don't have any formal rights to get a refund, but you can still ask to get your money back. Use our template letter to claim a refund for vouchers from the administrators.

4) Healthcare cash plans

What's the problem? Someone with fairly low level health needs could end up paying more in premiums than they get in benefits. We looked at healthcare cash plans from the biggest five providers and found that in one scenario you could be on average £1,023 down over five years. 

Take action: It may be better to self-insure by putting money away in a best rate savings account. From cash Isas to fixed-rate bonds, find out which savings account is the best for you

5) ID fraud protection policies

What's the problem? The benefits are often not worth paying for as consumers are covered by their banks for losses due to fraud. Consumers can check for any unusual activity on their £2 statutory credit report. ID fraud protection policies have been mis-sold in the past in some instances. 

Your rights: Do you have reason to believe you were mis-sold an identity fraud policy? We tell you how to complain about mis-sold identity theft insurance

6) Expensive tracker funds

What's the problem? Some funds charge three times more than the cheapest to manage investors' money which can have a big impact on returns. Consumers should switch providers if they're paying over the odds. 

Take action: Are fund charges eating into your returns? Find out more about the impact of high fees in our guide to fund charges

7) Structured deposit schemes

What's the problem? These are sometimes sold without proper advice and charges are not made clear. Previous Which? research has found that some schemes don't always achieve the returns that they advertise. 

What we want: The Financial Conduct Authority (FCA) has called for firms to improve how they design and sell the products. We want it to stop misleading promotions and ban banks from getting commission on them. 

8) Over-50s insurance plans

What's the problem? These plans often pay out less that you could save over the same period. We looked at over-50s plans from 14 providers and found a 60-year old non-smoker, paying premiums of £15 a month, would qualify for an average pay out of £3,334 after 30 years, but it would only take around 15 years to beat this by investing in a cash Isa with 3% interest on average. 

Take action: Think carefully about whether this is the right option for you before taking out one of these plans. If you do decide to invest in a cash Isa take a look at our best rate cash Isa tables. 

9) Paid-for debt management 

What's the problem? Debt charities such as StepChange, offer good quality and impartial advice for free, so we don't believe there's a need to pay for this.

Take action: If you're struggling with debt don't pay out for advice but get free, impartial help and advice from one of the free debt advice organisation's in our list

10) Card protection

What's the problem? People are already protected against being a victim of fraud, and the extra benefits such as key cover can often be found cheaper elsewhere. This is another product that has been mis-sold in the past in some cases. 

Your rights: Your bank should refund you for unauthorised transactions made on your credit or debit card unless is can prove you have acted with 'gross negligence'. If you have a dispute with your bank about an unauthorised payment you can complain. Find out how by using our step-by-step guide to making a complain about an unauthorised transaction on your card

More on this...