Bad deals that may sound good at first

Bad deals that may sound good at first »Play Video
Cell phone insurance

For most of us, our cell phone is a lifeline that keeps us connected to the world. So it might seem logical to buy insurance to cover loss or damage, but consumer experts recommend against it.

These plans have high deductibles - as much as $125 for a smart phone. File a claim and the third-party companies that run these programs can send you a refurbished phone rather than a new one. They can even substitute a different model.

"You're better off keeping your old phone and if something should happen, look into having it repaired you may find you can get some repairs done for under $100," said Mike Gikas, senior electronics editor of Consumer Reports.

Buying checks from the bank

Where do you buy your checks? From the bank? It's convenient. But unless they're free, you'd probably save a bundle buying from one of those checking printing companies.

"They can be much less expensive than buying the checks from the banks and these are fancy checks on top of it," says Edgar Dworsky, who runs the website ConsumerWorld.org.

He says you can cut your costs by about 50 percent by using a company such as Checks Unlimited or Checks in the Mail.

Prepaid debit cards

Expect to see banks and credit card companies step up their marketing of these highly profitable debit cards this year. They're billed as a simple way to control spending and avoid high interest rates.

But here's the rub. Prepaid cards have all sorts of fees. Right off the bat, there's a setup or activation fee that can run around $10.

There may also be a monthly fee and charges to reload money, talk to customer service or get a paper statement.

Credit card insurance

Here's the pitch: make sure your family isn't saddled with huge credit cards bills if you lose your job or are unable to work.

Most of these policies will make the minimum payments for a certain amount of time. They're not cheap. For a $3,000 balance, you could pay as much as $480 a year.

Credit experts say you'd be better off using that money to pay down the balance then to buy insurance.

Convenience checks

Now a warning about "convenience checks," those checks you get but never requested from your bank or credit card company.

These are not ordinary checks. Use one and you're agreeing to a short-term loan. And the interest clock starts ticking as soon as that check is cashed.

And the interest-rate is a real eye-opener.

"They can be 18, 20, 24 percent," says Dworsky. "They're pretty much on par with what you'd expect when you get a cash advance from your credit card and we all know how high those rates are."

Bruce McClary with ClearPoint Credit Counseling Solutions says if you're desperate for cash, this is not the way to go. Try to find some other option.

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