20 everyday rip-offs

17/08/2008

Everyday life is filled with little rip offs that could seriously hurt you wealth.

So we've put together a guide to 20 of the sneakiest tricks banks and other companies use to try to part you from your hard-earned cash.

1. Payment hierarchy
If you choose a credit card with a low balance transfer rate and then build up extra debt on it - payable at a higher rate - most cards companies will use your monthly payments to pay off the cheaper debt first.

Known as payment hierarchy, this ensures you pay as much interest as possible within the terms of your deal.

2. Late payment/penalty charges
Banks and other lenders have come under fire recently for overcharging customers who exceed borrowing limits or fail to make a payment on time.

The Office of Fair Trading has ordered credit card companies to reduce the fees, which stood at up to 30 a time, to a maximum of 12 - but even this is a high price to pay for unintentionally slipping into the red.

3. Automatic service charges
A lot of restaurants and bars now add service to the bill automatically - usually at a rate of 12.5%, but at up to 15% in some cases.

The worst offenders also fail to make it clear that service had already been added, which could lead to you adding more by mistake.

4. 0845/0870 numbers
Many organisations, including some banks and government bodies such as the DVLA, use 0845 or 0870 numbers for their customer enquiry lines. However, the cost of calling an 0870 line during the day is at least 4p a minute, while many of the organisations in question receive a cut of the cost of every call.

5. Insurance policy interest rates
Insurers often offer cash-strapped policyholders the chance to spread the cost of their cover over the course of a year by making 12 monthly payments. But beware: the interest rates applied to these "loans" can be more than 30%, potentially adding hundreds of pounds to the cost.

6. Mobile phone roaming charges
The European Union recently cracked down on mobile phone companies such as Vodafone and Orange for overcharging customers who use their phones abroad.

The firms have now cut their rates - with Orange now offering 30 texts within Europe from ?6 a month - but data downloading charges remain extortionately high. One Vodafone customer ran up a bill of 11,000 downloading two episodes of Friends while on a business trip in Germany.

7. Restaurant cancellation charges
Some restaurants will charge you a fee if you have to cancel a booking within a certain time. Gordon Ramsay's Boxwood Caf?, for example, charges anyone cancelling a table less than 24 hours in advance 50.

8. PPI
Friendly society LV=, previously Liverpool Victoria, was recently fined for automatically adding payment protection insurance (PPI) to people's loan agreements and using hard sell tactics to convince people to keep it if they noticed.

But even when it is not mis-sold, this type of cover can add thousands to the cost of repaying your debts and will often fail to pay out should you make a claim.

9. Travel insurance
Travel agents will still try to sell you holiday insurance along with your travel and hotel booking where possible. But you can get much cheaper, and more comprehensive, cover through an insurer.

If you plan to go on more than two overseas trips in a year, remember too that you will probably be better off with an annual multi-trip policy.

10. Online card payments
Whether you are buying a holiday or a sofa, you can get great discounts online.

However, it is worth looking out for card payment charges. No-frills airline Easyjet, for example, charges people buying tickets using a Visa Debit card an extra 1.75, while Mastercard users pay 4.95.

11. Ticket arrangement fees
The internet is very useful for buying tickets, both for events such as concerts and for travelling.

But be aware that many online ticketing firms charge arrangement fees that are added to the cost.

Train ticket website the Trainline, for example, charges people a 50p arrangement fee.

12. Airport currency exchange
The weak pound makes it even more important to get the best possible exchange rate on your holiday money - and that means not leaving it until you reach the airport.

If you do not have the time to go into a bank or exchange bureau before travelling, why not order it online through a specialist provider such as Travelex?

13. Debt advisers
The debt culture that caused the credit crunch has also spawned a plethora of debt advice companies. These charge to negotiate a repayment plan with your creditors, but you can get the same service for free through charities such as Debtline or the CCCS.

14. Residential parking
Drivers living in some parts of London can park for free as long as they have a residential parking permit. But this is not true across the capital.

In Camden, for example, residents pay up to 145 a year for a permit that only allows them to park on certain streets - leaving them with a long walk home if there are no spaces available.

15. Bin overfilling fines
Some councils have recently started fining residents for putting out too much rubbish. Kirklees council, for example, charges 60 if your rubbish keeps the lid of your wheelie bin open by just four inches.

16. Store cards
Most large retailers offer store cards. But the interest rates on cards of this kind are generally above 10% and can be up to 30%, making them a very costly way to hold debt.

17. Letting agent fees
Letting agents charge up to 15% of your rental income to find a tenant and manage your property for you. However, the depressed housing market has made many more willing to negotiate, so it is worth playing a few local agents off against one another to get the best deal. The same is true if you are selling a property.

18. Mobile phone insurance
Most mobile phone companies offer insurance from 60 a year. However, making a claim on policies of this kind can prove very difficult. You will not be covered if your phone was stolen from the seat of your car, for example.

A better idea is to add personal possessions cover to your home contents policy as this will cover your phone and other items if they are lost or stolen.

19. Packaged current accounts
Current accounts that include "benefits" such as travel insurance and breakdown cover can offer a good deal if you take advantage of all the extras on offer. However, they generally charge an annual fee of around 10 a month, meaning you could end up paying for nothing if you do not.

20. Utility bill estimates
Energy companies such as British Gas estimate your bill, meaning you can be paying far too much a month.

With the recent price hikes bringing many household bills to more than 1,000 a year, it makes sense to check your meters to make sure you are not overpaying.

By Jessica Bown

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