5 dumb 'deals' that waste your cash

There are so many ways to waste money, I can't name them all. But I can name 5.

By Stacy Johnson Dec 17, 2009 11:52AM

The world is full of evidence that when something’s heavily advertised, it should be heavily scrutinized. In this TV news story/blog post I cover five of the countless examples.

Frequent flier cards that just don’t fly. Credit cards that offer frequent-flier miles used to be great deals, but with rising expenses and fewer fliers, airlines have had to cut back wherever they can. And in many instances, frequent-flier programs took the hit.

These days, they’ve raised the number of miles needed to cash in on free seats and lowered the number of free seats available, so it’s really not such a good deal anymore.

Better idea?Get a cash-back credit card and use the extra money to shop for cheap airline seats.

Interest-bearing checking accounts that aren’t bearing interest. Many interest-bearing checking accounts are only paying 0.25% -- 1/4 of a percent! A measly $12 a year on a $5,000 account and a rate far below even today’s meager inflation rate.

Better idea? Find a free checking account (credit unions are a great place to look), then shop for the best savings account you can find. Some are paying as much as 3% -- still not much, but 12 times what you were earning with that “interest-bearing” checking account.

Check out the following news story, then meet me on the other side for the rest.

Extended warranties that extend your expense. Extended warranties may sound like a good idea, and they could be -- if they didn’t cost so darn much. As it is, most aren’t worth the money. Sure, there’s the occasional thing that breaks, which you get repaired for free with the warranty. But add up all your extended warranties and they’ll likely cost more than you would’ve spent on repairs for the one thing that actually broke.

There are exceptions, and exceptional situations (Example: I’ve got a new puppy in my house right now, and wish I’d purchased an extended warranty on pretty much everything within her reach) but by and large these things are profit centers for the dealers that sell them more than they are profitable protection for you.

Better idea? See if your credit card offers a buyer’s protection plan, check for a good manufacturer warranty before you buy, or just take your chances. Oh, and get a muzzle for your puppy.

Free credit reports that aren’t free. There’s a heavily advertised Web site with a jingle so pervasive that it’s likely the first place we all think of when hearing the phrase “free credit report,” but that site doesn’t give you a free credit report unless you sign up to use a service that isn’t free. That shouldn’t even be legal. But legal or not, it’s definitely dumb.

Better idea? Get a free credit report by going to the site where you can actually get one: AnnualCreditReport.com.

You’re entitled to one free credit report from each of the big three credit-reporting agencies (Experian, TransUnion and Equifax) once every 12 months. Which means that you can get one free report from one agency every four months, thus looking in on your history several times throughout the year.

Paying money to repay money. Mortgage service companies have for years offered special “plans” that promise to retire your mortgage years early by essentially having you pay half your mortgage every two weeks rather paying the full amount once a month. Because the year has 52 weeks, doing this will cause you to make 26 payments, essentially making an extra payment which will go toward reducing principal and retire your mortgage early.

Better idea? Paying extra principal on your mortgage (or any other debt) is always a great idea. But paying some company that’s already making a ton off of you to use a “system” that you can use anytime you’d like for free? Dumb.

There’s certainly no shortage of dumb products and services out there. Those are five of our ideas. Tell me yours.

Related reading:

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bankingbanksbudget travelcredit cardscredit reportsMoneyTalksMoneyTalks NewsmortgageStacy Johnson

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Editor Bev O'Shea lives and works in the foothills of the Appalachians. A former copy editor for The Atlanta Journal-Constitution and the Orlando Sentinel, she joined MSN Money in 2007. She's a fan of sunsets, college football and free shipping, among other things.

Having worked as a writer, reporter and editor for more than 25 years, Editor Julie Tilsner is the sort of person who can't help but correct grammar in Facebook postings and on billboards. She's written for BusinessWeek, the Los Angeles Times, Parenting, Redbook, AOL and others. She lives in Los Angeles County with her family and loves to drink wine and practice yoga, although not generally at the same time.

A writer for MSN Money since January 2007, Donna Freedman won regional and national prizes during an 18-year newspaper career and earned a college degree in midlife without taking out student loans. She also writes about smart money tactics for magazines and on her own site, Surviving and Thriving.

Mitch Lipka has been warning people about scams and shining light on questionable business practices for more than 20 years. Mitch, the consumer columnist for The Boston Globe, has also been a reporter and editor at The Philadelphia Inquirer, Consumer Reports, South Florida Sun-Sentinel and AOL. He won the 2010 New York Press Club award for best consumer reporting online and was honored in 2011 for his reporting on child product safety.

Marilyn Lewis is an award-winning writer with a passion for getting readers clear, straight information that helps them stay out of financial trouble. A former reporter for The San Jose Mercury News, she works from her home in Port Townsend, Wash. Contact her at MarilynLewis@Outlook.com.

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