Even the most careful consumer can become the victim of a scam. Learn what to look for and avoid being duped out of your dough.
Step 1: Beware of travel clubs Beware of travel discount clubs -- especially if there's an in-person sales pitch. Travel clubs often boast tremendous savings, but consumers can often get better deals on their own, saving membership fees. Club contracts often contain hidden fees and gimmicks that work to the disadvantage of the member.
TIP: Consumers have filed thousands of complaints about travel clubs with the Better Business Bureau.
Step 2: Avoid cellphone replacement insurance Avoid cellphone replacement insurance unless you carefully read and understand the contract and find that it suits your needs. Many contracts stipulate that they need send only a "comparable" phone -- which may be a different model that is incompatible with your accessories or a refurbished phone of questionable quality.
Step 3: Be careful of mail-in rebates Be careful of mail-in rebates, which often feature multiple requirements that must be completed perfectly in order for the consumer to qualify for the rebate. Shop around for comparable deals before committing to a mail-in rebate, or commit only to paperless rebates that can be tracked online.
Step 4: Avoid pet health insurance Don't be taken in by pet health insurance offers. Coverage is often limited, loaded with exclusions, and many don't even cover vaccinations. If you factor the cost of routine care for your pet into your budget and reserve an extra few hundred dollars for emergencies, you'll likely end up paying less than the insurance policy.
TIP: Routine care costs for a dog are about $453 a year and about $363 for a cat.
Step 5: Be skeptical of extended warranties Consider passing on extended warranty offers. Many companies send notices disguised as legitimate warranties when the product's initial warranty hasn't expired yet. And, even if the extension is legitimate, it's often unnecessary -- retailers can profit as much as 80 percent on an extended warranty contract.
Step 6: Don't "rent-to-own" Steer clear of rent-to-own merchandise. The interest rate on rent-to-own products can add up to well over 100 percent, and you will have been better off buying the merchandise outright. Plus, if you miss a payment, the merchandise can be repossessed and you'll be out the product as well as the money you've already paid.
Step 7: Avoid payday loans Don't get trapped in a "payday loan" cycle. The interest rate on a payday loan can be as much as 500 percent, so you're better off taking an advance on a credit card with a much lower interest rate. If you are taken in by a scam, send a written complaint to the company, dispute the credit card charges, or take them to court.
FACT: In 2008, Bernie Madoff scammed investors out of $50 billion in a Ponzi scheme.