New York - It's astonishing how often bad ideas can sound temptingly good at the point of purchase. You put down your money without thinking twice -- and regret it later.
Here's a Dirty Dozen of Bad Ideas, compiled by Barbara Kaufman and Robin Leonard for the Berkeley-based consumer publication Nolo News:
1. Buying credit-card protection. Many banks and credit-card companies urge you to buy insurance against the risk that someone might steal your credit card and use it. Cost: typically $25 a year. But federal law limits your losses to $50, and many banks waive even that. This is "protection" you don't need.
2. Buying credit insurance. When you borrow money, lenders often urge you to take life and disability insurance that will repay the loan if you're no longer earning a paycheck. This coverage isn't worth its price, unless you're so ill you can't get insurance elsewhere. Furthermore, the disability policy pays off only in narrow circumstances. If you need more insurance, see an insurance agent.
3. Buying extended warranties. Buyers of cars, appliances or electronics may be offered a warranty that picks up where the manufacturer's guarantee leaves off. The merchant makes out like a bandit because he charges so much more for the service than he ever puts out in repairs. Good appliances or auto parts rarely fall apart during the years these warranties cover.
4. Taking a loan to pay back taxes. The IRS might advise you to you borrow money to settle a delinquency. Don't. You can usually arrange a payment schedule with the IRS at only 10 percent interest (adjusted quarterly), which is pretty cheap.
5. Paying for the right to see your credit file whenever you want. The credit bureau, TRW, will sell you continuous access to your file for $39. But you can buy that file any time, for $2 to $15, depending on your state. If you're turned down for credit based on something in your file, you can get the report free.
6. Paying a credit repair clinic. These clinics claim they can fix up bad credit reports so that even deadbeats and bankrupts will qualify for loans. They can't -- at least, not legally. But they'll charge you anywhere from $250 to $2,000 anyway. True information can't be removed from your report. Erroneous information can be removed by you, at no cost.
7. Paying a debt-consolidating company. Stay away from companies or lawyers who offer to pool your debts and arrange for acceptable payments to creditors. Your creditors may reject the arrangement. The huge fees paid to the lawyers will sink you even further under water.
8. Paying for Social Security information. Some groups make a mint by selling you your own Social Security record or by offering to get Social Security cards for your kids. What a waste. You can handle your own Social Security business free.
9. Paying a service fee to get your FHA mortgage refund. When you close out a mortgage that was backed by the Federal Housing Administration, you may be entitled to a refund. The FHA returns any portion of your mortgage-insurance premium that wasn't used to cover defaults. But you can get that money yourself, without paying anyone a dime. For information, just call 703-235-8117.
10. Paying a time-share resale company. Fraudulent resalers sign up people so desperate to sell their time shares that they'll pay a fee of $400 or so up front. The resalers may say that the sale is "guaranteed." All that's guaranteed is that you'll never see your $400 again.
11. Claiming a "dream vacation" prize. If you listen to a sales pitch for Florida condos, or a buy a supply of costly vitamins, or succumb to a host of other sales pitches, your reward -- supposedly -- is a sensational free vacation. But all you get is a vacation certificate that might give you two or three nights at a mediocre motel. You usually have to struggle for reservations and may have to pay the plane fare yourself.
12. Buying auction information. Several publications and expensive 900 telephone numbers sell you information on auctions of surplus government property. But you can get this information free. One source for such things as cars, trailers and office equipment: "Sale of Federal Surplus Personal Property," Federal Supply Service (FBP), General Services Administration, Washington D.C. 20406.