Ten classic cases of false economy

Covered mag, presented by Gocompare.com
  • | by Kristian Dando

Ever bought something that you think seems a complete bargain, only for it to end up a highly expensive and regrettable burden in the long run? Chances are that you have. It’s pretty easy to be hoodwinked by a seemingly cheap price tag, or suckered in by a deal which looks too good to be true. Thousands of British consumers do the very same every year.

Here’s ten classic cases of false economy…with some potentially cost-effective alternatives suggested, too.

Paying the minimum amount off your credit card every month

Paying your credit card debt off in tiddling little amounts means that you’ll pay a shedload of interest on what you owe in the long run – to put that in perspective, a credit card debt of £3,000 would end up costing £4,000 in interest payments, spread over 27 years (that’s at a fairly typical 17.9 per cent interest rate) if you just paid the minimum amount off every month. Paying as much as you can afford to from your bill every month will make servicing your debt much cheaper in the long run.

Spreading the cost of your car insurance over a year

Most insurance companies will charge you interest payments if you opt to spread the cost of your policy over the course of 12 months. As car insurance is getting more and more expensive all the time, having to fork out more than you have to on a legal requirement is just plain daft. The thing is, most of us don’t have sufficient loose change rattling about in our pockets to cover the £921 average cost of an annual car insurance policy (according to the AA annual Insurance Price Index) straight off the bat.

A good way to dodge those pesky interest payments on your car insurance might be through paying in one sum with a 0 per cent purchases credit card, then setting up a direct debit to pay off the cost of the policy over the course of the year. This means you’ll get the best of both worlds – manageable payments with no interest.

Skimping on insurance policies

This applies right across the board – from home insurance, to car insurance, pet insurance, travel insurance and beyond. Plenty of insurance providers will offer bare-bones policies which could leave you out of pocket should you need to make a claim. Thankfully, Gocompare.com’s totally ace personal finance product comparison service lets you run the rule over hundreds of polices from loads of insurance providers, so you can make an informed decision on the price and benefits of each offer.

Multi-buy offers in shops and supermarkets

Be wary of offers and deals in supermarkets which offer to throw in extra items which you might not (and probably don’t) need if you buy a certain amount, particularly if they’re perishable goods!

Buying a high-mileage used car

It’s possible to pick up a set of well-worn wheels for no more than a few hundred quid. But once cars get over a certain mileage or age, expensive mechanical gremlins start setting in. Getting an old banger through its annual MOT can be a costly enterprise, so it’s frequently much better value to spend more on something which won’t cause you too much bother in the long run.

‘Disposable’ high street fashion

You can’t move for high street shops packed to the rafters with tempting, low-cost fashion items. It’s very easy to go in and spend a small fortune, returning home with bags of clothes, shoes and accessories that cost comparatively next to nothing. But these sort of items can lose their shape easily after a few washes, break easily, and will probably not get a lot of wear in the following years. In many cases, it’s better to spend a bit more on higher quality gear which will last longer.

Not having a pension

At the moment, setting aside a few hundred quid every month that you could quite happily spend going down the pub or on questionable streetwear items might seem like a needless deployment of precious resources. But with talk afoot of an impending ‘pensions crisis’ and a greying population, making sure that you’ve provided for yourself in your post-work years is more important than ever. Lots of employers will contribute money towards your pension, and it’ll also be topped up by the state, too. If in doubt, check the score with an independent financial advisor.

Pay-as-you-go mobile phone deals

Pay-as-you-go mobile phone deals are usually cost-effective for only the most miserly phone users. But having a contract doesn’t mean you need to upgrade to a smartphone with all the computing power of NASA mission control but a battery life which won’t last from breakfast ‘til the time Coronation Street is on. If you’re happy with your current phone, and don’t want the excesses of a smartphone, lots of mobile operators offer contracts with plenty of minutes and more text messages than you’ll probably use for less than a tenner a month.

Downloading music or films illegally

It might not cost you any money, but downloading hooky music or films which have fallen off the back of a torrent site means that more and more rising filmmakers or musicians may call it a day because it’s impossible to make a living from their profession. Then people will stop making groundbreaking music or films, and all we’ll be left with is guaranteed money spinners like X-Factor contestants and endless rehashes of tired movie franchises. Nobody wants that, save for maybe Simon Cowell and Michael Bay.

Cheap, flavourless Cheddar

This is essentially rubbish, because you have to use twice as much to get any flavour from it, particularly if you’re using the cheese for cooking. Opt for something more robust, and voila! You won’t have to use nearly so much.

What are your most irksome examples of false economy? Contact the editor with your suggestions….