Worst financial money-wasters named
The watchdog and magazine publisher has released a list of 10 financial products which offer poor value for money, cost more than they save, or turn out to be useless when you come to claim.
Some - such as extended warranties for electronics, ID fraud protection, credit card protection and structured deposit schemes - are sometimes actively mis-sold.
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 crack down where it finds evidence of poor practice."
The group said: "With the cost of living putting pressure on many households' budgets and people feeling the squeeze, it's more important than ever that consumers are buying financial products that are good value for money."
Some products it highlighted were simply poor buys, such as charity credit cards, whose customers would need to spend £129,600 every year in order to match the average donor's contribution of £27 per month.
Gift cards or vouchers are vulnerable to companies going bust and over-50s insurance plans pay out less than a cash Isa, while debt management companies merely offer services available from charities for free.
In other cases customers were at risk of being misled about what the products did and what benefits they offered.
In 2012 insurance company CPP was fined £10.5 million by the Financial Services Authority for overstating the risk of identity theft during ID protection sales, and for charging customers for services their banks already provided.
A Which? spokesman said: "Sometimes when you took out a credit card there'd be a number to ring to activate your card. But when you rang it, you were actually calling CPP, who wanted to sell you this worthless product.
"Customers were buying cover they didn't need to guard against risks that had been exagerrated."
Other mis-sold products included extended warranties for electronics, which are often already covered by manufacturers or by consumer law.
Mystery shoppers sent to buy washing machines and TVs at five high street stores found staff made "exaggerated claims" and pushed warranties on them without being asked.
Which? says 12.5 million people have bought an extended warranty for an electrical item in the past three years.
The full list of money-wasters is:
1. Extended warranties. These are sold with electronics products to offer 'peace of mind' - but only 2% of TVs need repairing in their first five years, and customers are often misled about what damage they actually cover.
2. Charity credit cards. These let you give as you spend with no extra cost, but they are not the most efficient way to donate. Most people would be better off getting the best cash-back credit card and donating the extra each month.
3. Gift cards or vouchers. Not a bad gift if the value is small, but administrators of bankrupt companies have no obligation to accept them.
4. Healthcare cash plans. These let you reclaim a percentage of the cost of everyday medical treatments such as dental check-ups and eye tests. But unless you are a very heavy user, you will end up paying more in premiums than you receive in benefits.
5. ID fraud protection policies. These claim to cover fraudulent transactions made on your bank account. But banks cover their users for losses due to fraud unless they can prove you have acted with gross negligence.
6. Expensive tracker funds. Tracker funds let you invest across a group of companies and follow their fortunes, but some charge two or three times the going rate to manage your money - which might eat into your returns.
7. Structured deposits. These are sold as low-risk investments, but are almost always beaten by best rate fixed-rate bonds. In 2012 they were often sold without proper advice on returns and charges.
8. Over-50s insurance plans. These pay out a lump sum at death, but in most cases they pay out less than you could have saved in an Isa over the same period.
9. Paid-for debt management. These help you manage your debts and establish plans to pay the money back. But charities such as StepChange do the same thing for free. In October, the Office of Fair Trading revoked the licences of three debt management companies for poor transparency and misleading information.
10. Card protection. These claim to cover stolen cards or stolen car keys. But their services are available already, either from your bank as part of the service or from insurers at cheaper prices (eg car key insurance as part of car insurance).
© 2013 Press Association