3 Financial Products That Hurt You More Than They Help You
Over the last several years, many new types of financial product have been create by the financial wizards of the day and marketed to the public as some of the greatest financial products ever. What they are not telling you is that these financial products are the greatest thing ever for the companies that sell them, not the consumers that are buying them. There are many financial products that you should be wary of if you do not understand them completely but these 3 financial products should be avoided at all costs because they do very little to help you but can hurt your financial situation in a significant way.
Product 1 – Payment Protection Insurance For Credit Cards
This type of insurance product was created by the credit card companies and advertised as a safety net for insulating a person from credit cards debt if the person becomes disabled, seriously ill, or loses their job. The problem with payment protection insurance is that the premiums for the insurance are ridiculously high and there are so many exclusions for the policies that very few people actually qualify for the benefit if a situation arises where they are unable to pay their credit card bills.
This means that many people are spending a great deal of money on the payment protection insurance for little to no benefit. It would be smarter and more economical to place the money that would have been spent on payment protection insurance into an interest bearing savings account that can be used for emergencies, such as losing your job and being unable to pay the minimum payment on your credit card accounts.
Product 2 – Payday Loans
Payday loans are one of the worst financial products on the market today for a variety of different reasons. The interest rates on these loans are astronomical, averaging 300 – 500% per loan which is conveniently disguised as a fee for taking out the loan. There is also a very short grace period for repaying the loan, often as little as two weeks, which is not nearly enough time for a person to make up the income that will be needed to pay off the loan.
Researchers have found that as many as 85% of the people that take out a payday loan get trapped into a virtually endless cycle of debt, where they have to take out new payday loans to pay off the previous loans that were taken out. It is estimated that many people pay more than $500 in fees for floating the payday loan for multiple cycles until they can pay off the loan without facing a financial hardship in other areas of their lives.
Product 3 – 401K Debit Cards
If you are putting money into a retirement account, that is where the money should be staying until you reach a retirement age, but many companies are now creating ways for people to tap into their retirement accounts to pay for the items that they desire now. This is slowly eroding the financial safety net that many people will need to use for their retirement and each dollar taken out of these 401K accounts is another dollar that is not earning interest towards the person’s retirement.
If you really want debt freedom, you’ll need some high-quality tips for paying off debt and help from some good debt freedom and debt help companies.
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