There are a lot of bad financial products out there. Some of them are downright punitively bad for you. While some financial products offer you great opportunities to build wealth, others can sap your wealth with high costs — and even keep you in the debt trap forever.
While some products aren’t always bad for everyone, many financial products are generally not a good idea for most people. Before you decide to take the plunge with a financial product, really think it through, and determine whether or not you are really make the best decision for your finances.
This post is kicking off a two part look at ten of the absolute worst financial products you could possibly get. We can argue over the order of these all day long but I think you’d be hard pressed to argue in favor of one of these products!
Here are 5 of the worst financial products. We’ll share the next five, who are even worse, products tomorrow!
10. Bank Accounts with Fees
One of the biggest sources of discontent amongst consumers is rising bank fees. Bank accounts that come with fees erode your wealth. Meanwhile, banks are taking your money, and lending it out for a profit. They make money on your fees, and on interest lending your money gets for them. Look for fee-free accounts. At the very least, look for an account that waives fees if certain conditions are met.
9. Payment Protection Policies
You rarely need these types of policies. These are plans that purport to cover your payments if you become unable. Credit cards are notorious for offering these types of policies. If you carry a balance on your credit card, you could pay quite a bit each month. These policies can be expensive, and they are known for making it difficult to get a payout, since there are so many exclusions. You’re better off building an emergency fund to deal with payment issues.
8. Department Store Credit Cards
Many of the department store credit cards you see come with high interest rates. Few of them have rewards programs or perks. You can’t use them anywhere other than the one store. And, on top of that, when it comes to your credit score, department store cards aren’t seen as favorably as major credit cards from major issuers. You’re better off looking for a rewards card with a competitive interest rate from a major issuer.
7. High Fee Mutual Funds
Mutual funds are attractive because they provide instant diversity (in many cases). However, not all mutual funds are created equal. There are high fee mutual funds, actively managed, that can sap your wealth. Some managed funds charge upward of 2% a year, as well as charging sales loads at the front end and the back end.
This doesn’t mean that all mutual funds are bad, though. The funds with high fees, though, will lower your returns dramatically over time. Check carefully for fees. There are plenty of low-cost index funds to choose from; these will give you diversity, but the fees are much lower.
6. Whole Life Insurance
For some people whole life insurance can be helpful — especially if it’s a big policy. Most of us, though, don’t need whole life insurance. Agents will try to hook you by pointing out that whole life policies build cash value. While this is true, most of us ordinary folks can’t afford the premiums on a whole life policy that would provide significant cash returns. Instead of spending your money on a whole life policy with meager cash returns, consider getting a much cheaper term life policy, and then use the difference in ways that are more likely to yield higher returns over time.please add your thoughts now! }