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Financial Products That May Tear the Lining of Your Pockets!

Financial Products That May Tear the Lining of Your Pockets!

Financial products have made our lives extremely easy. There was a time when making simple payment through a cheque took hours/days to get completed.

The modes of payment were limited, and so were the instruments used for carrying them out.

Quick transactions were limited to a set geographical area.

Payments to be made overseas took days to get fulfilled.

Fortunately, things started going uphill as the years passed, and the pace of financial processes started increasing. Today, you can make payments worth millions in a second, to any corner of the world. The use of cash has become minimal, and majority of the financial transactions have turned digital.

The Financial Facilities That Are Seeping into the Market

The development of economies around the world has slowly led to a plethora of financial facilities being offered to people.

Banks started offering debit and credit cards. The facility of flexible loans seeped into almost every need that a customer may have.

However, online payment has revolutionised the financial market. It has allowed users to make payments from their respective smart devices, irrespective of where they are physically.

The use of e-wallets started a new trend of making payments. Hence, all these financial products have been immensely helpful for the customers as they have provided them with peace of mind and an ease of operation.

Are Financial Products Always Helpful?

There are always two sides to any argument.

Without doubt, financial products have helped everyone to a great extent, but they have also created loads of confusion and led to multiple scenarios of malpractice.

Every other day, there are reports of some or the other financial fraud or scam, robbing innocent people of their money.

Role of Financial Institutions

The majority of the financial institutions have become greedier and they need more and more money out of their ignorant customers. Often, customers purchase financial products without having complete knowledge about the product they are about to purchase.

This is exactly what a lot of financial institutions take advantage of.

There are several products that seem very convenient and helpful but are not so beneficial for you in the end. You should therefore always be alert about these products and make every purchase and transaction wisely.

Some of such financial products are discussed below.

Credit Cards Carrying Maintenance Fees

Credit cards have always expanded the limits to which an individual can spend. They have given you the power to worry less about your existing bank balance and spend money with a lot more ease.

When credit cards were new in the market, they came along with a maintenance fee. This was an additional charge that the customer had to bear along with the bill payments.

However, as the years passed, companies started eliminating these fees. If you are still sold cards with maintenance fees, never opt for them.

Almost every card company has gotten rid of these charges, and you should therefore opt for another company while purchasing credit cards if this crops up.

Store Credit Cards

There are several companies selling credit cards that are store-specific. These are cards that you can only use at the stores where you signed up for the card. These cards are never really useful to the customers as it restricts their purchases.

Credit cards are never supposed to limit you to what you are supposed to buy and what not. There are also various baits used by companies selling store credit cards. A lot of companies offer a rebate of up to 30% on signing up for a new credit card on the day of purchase.

Irrespective of the incentives given to you, never choose to go for store specific credit cards. Also, these cards usually have a very high interest rate, which could lower your credit score.

The way these cards function is a lot different than co-branded cards that can be used anywhere. Co-branded cards have much lower interest rates and better internal control. Hence, no matter how lucrative they sound, never go for store credit cards.

Payment Protection Insurance (PPI)

Insurance is always a healthy option when it comes to securing your financial future in case of emergencies. Monetary emergencies are the worst, as you are never really sure about the amount that could be squeezed out of your savings.

PPI is one such insurance policy, usually sold along with loans or credit to customers by various financial organisations. If the buyer is not able to continue with their job due to any emergency, PPI covers the amount that they lose, making sure that they keep receiving a steady income.

Where Can PPI Be Helpful?

PPI can be really helpful in case of an unforeseen medical emergency, accident or any other authentic reason behind the policy-holder losing their job, as it helps cover repayments for the loan, mortgage or credit card.

However, it is not always advantageous.

There have been millions of cases where PPI policies were blatantly mis-sold to customers who were either unaware of the policy being lumped into their loan/mortgage agreement or who were unable to claim from the policy in the first place.

How Was PPI Mis-sold?

The policy lenders have often sold PPI along with a sanctioned loan or credit, without the knowledge of the customer. There have also been cases where the lender has not clearly informed the customer about all the clauses of the policy.

Parts of the policy have often been purposefully hidden, and only the convenient clauses were discussed with the customers. This paints a rosy picture in the minds of customers about taking out a PPI policy.

This is how financial institutions often take advantage of innocent and ignorant customers to earn more commission. This issue gave rise to the infamous PPI mis-selling scandal that was uncovered over a decade ago in the UK.

Customers were robbed off millions by the financial institution through mis-sold PPI. Many of the major banks and credit card companies were found guilty in the scam.

The mis-sold customers have been making complaints and claiming compensation for the last ten years. And the extent of the damage is so huge that the complaints are still pouring in steadily every passing month!

After all the chaos, getting a PPI policy is definitely not a safe option to go for. In fact, you should check if you have any mis-sold policies with you that you are not aware of, and file your claim as soon as possible.

Payday Loans

These are loans which allow you to earn your future pay-cheque in advance. These loans are for people who want to meet certain immediate expenses and can’t wait for their salaries to be credited.

Sounds interesting, right?

Maybe, but it’s also important to note that these loans carry a ridiculously high interest rate in the name of a fixed cost.

If you choose to go for this loan, you are likely to end up paying a huge amount in interest. If you really need money to cater to immediate expenses, a low interest credit card is a much better option than payday loans.

Even if you want to borrow a lump sum, always go for a normal loan instead of a payday loan. This would not only ruin your salary schedule, but also make you pay heavy interest.

Any Financial Product You’re Unable To Understand Completely!

There are hundreds of financial products available in the market. There is a product for every need and every situation that you may face and majority of the products seem attractive and beneficial.

Moreover, they are sold in a very appealing way by very persuasive sales staff. You should always make sure that you buy a product only if you are able to understand every single detail about it.

Never hurry while purchasing a financial product that you have little or no knowledge about. Before opting for them, always check every little clause related to the product. Ask all your questions to your lender before you finally make your decision.

Take advice from people, be it your friends, family, or your financial advisor. Also, be absolutely sure about the provider or the seller who is selling you the financial product.

If you are not fully certain about the credibility of the seller, never go ahead and make the purchase. Read all the documents very carefully, making sure that you are not cheated in any manner.

Even after you are sold the product, always lodge a complaint with the authorities if you feel you have been cheated or sold the product unethically.

Financial products were primarily made for the benefit of the users. They were supposed to make your life easier and more convenient from a financial standpoint.

Instead, due to various undesirable practices and unnecessary gimmicks, there has been a bunch of products creeping into the market that may not exactly be what you’ve been looking for.

Not all financial products are beneficial. Make a purchase only if the product really suits your needs and you are well informed about the provider’s identity.

There are also certain products that sound so good that you feel compelled to buy it. Have a keen eye for such products and always think rationally about matters relating to money, as there are certain financial products that can be really damaging for your pockets!

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