Consumer rip offs can seem like the domain of conspiracy-theory-obsessed taxi drivers. But when you begin to notice less and less cash left at the end of the month with no real addition to your lifestyle, who could blame you? These ‘rip offs’ also have a more technical term coined by economists, and are known as ‘market inefficiencies’ where the price of something is far removed from its actual value.
The value to price ratio could be out of whack for a number of reasons, but in this case your suppliers and retailers are not doing anything technically wrong, they are simply using a situation to their advantage where you have no choice but to use their goods or services, or you are simply too time poor to worry about being cash poor.
Therefore, to help you spot these rip offs in your everyday life and hopefully keep more money for yourself, rather than the salesman, compiled here are the top 10 ways you could be getting ripped off right now.
1. Airline Memberships
It’s nice to receive a little rock star treatment, especially when you’re traveling – which can be stressful enough without the waiting in line and the headaches brought on by other passengers. So you may think that the $425 a year membership to the United Airlines’ Red Carpet club is well worth it, even with the additional $50 application fee.
As a member of the Red Carpet Club you’re getting priority customer service and access to a comfortable, quiet and cushy lounge at major American airports. However, if you sign up for a United Mileage Plus Club Visa card, you can earn air miles as well as receive a Red Carpet Club Membership and the annual card fee is just $375.
2. Shoes to Make You Fit
You may have heard about these shoes which have a curved sole and promise to give you a workout with every step. A number of athletic shoe manufacturers make their own version and whether you opt for the Reebok EasyTone or the Sketchers ShapeUp you’ll be paying around $130 for a pair of sneakers.
However, according to Doctor Michael Ross who is the director of Rothman Institute’s Sports Performance Lab, “There is no evidence they will help you tone better or quicker than a regular shoe”. This is because the shoes primarily target the foot and ankle, and if you want to get fit and toned, just keep walking – all the way to work, the gym or just take the stairs. There is no need for special shoes.
3. College Textbooks
Education is an investment in your future, but you don’t need to over capitalize on your investment by being ripped off when it comes to your study materials. According to Nicole Allen a director at Student Public Interest Research Group students are being ripped off when it comes to books because they are “a captive audience since professors decide what books they need to buy”. As a result the average American student will spend around $900 a year on textbooks and with new editions coming out every three years, the prices will go up even further.
To help your starving students make their way more frugally through college look for sites like Chegg, which allows you to rent the books you need, allowing you to make savings in excess of 70% of the sticker price.
4. Travel insurance
Rather than suggesting you put yourself and your family at risk when you travel, simply think about where you are buying your insurance from, and whether they have your interests or their commissions at heart. In America more than $1 billion is spent every year with agents, as travelers aim to protect themselves from canceled flights and stolen luggage and possessions.
However, other products and insurance policies you already have can cover the same things for a fraction of the price. For example, many homeowners’ insurance policies cover lost luggage, and you may even have more extensive insurance coverage on your credit card – if you purchase your holiday using the card. Plus most airlines will reimburse you for the value of lost or damaged possessions up to the value of $3,000.
If you do want a dedicated travel insurance policy, go directly to your insurer rather than through an agent because purchasing insurance through a third party generally means that party is being reimbursed for signing you up, so you’re going to be paying more for your own safety and well being.
5. Premixed Baby Formula
Being a parent is a busy time but when you purchase ready to drink baby formulas you’re making it even harder by stretching the budget for no reason. Taking the time to mix the powder with water to feed your bub can save you over 50% in some cases. For example, buying a 32 ounce (or 192 fluid ounces) can of premixed formula which you can open and serve to your baby will last you just a few days and will cost around $45 according to Diapers.com whereas a container of powder that makes 168 ounces is around $25.
Instead of spending 57% more on premixed formula, invest in a water filter jug if you’re worried about the quality of the feed and you’ll be spending $30 in a once off purchase, rather than more than 50% more each feeding time.
6. Gift Cards from Credit Card Companies
Giving a prepaid credit card gift card is a nice way for you to give the perfect gift, while not encouraging overspending on a real credit card. However, some cards, like the American Express gift card, charge a flat $3.95 charge just for buying a card, regardless of the value loaded onto it. Visa not only charges $3.50 for the cards sold through bank branches but also includes a $2.50 monthly fee 12 months from the purchase date.
Plus, many merchants will not accept the cards if the value remaining is less than the purchase price of the item, so it can be hard to use up those few remaining dollars. Instead, if you want to give your friends and family the gift of an unrestricted shopping spree, just give cash.
7. Packaged Sliced Meats
According to a search on Whole Foods on Yahoo Finance, Pre-sliced and packaged deli meats can cost 27% more than having your meats sliced at the deli counter of the supermarket.
Therefore, take the time to wait a minute or two to be served at the deli counter rather than paying all of that extra money just for convenience, not to mention additional packaging and plastic.
8. Germ Fighting Supplements
No one likes being sick but if the Federal Trade Commission (FTC) were able to successfully charge manufacturers of products which claim to fight germs and colds, and boost the immune system then you are better off observing good hygiene practices and getting enough rest, rather than being ripped off by ‘germ fighters’. Also watch out for the packaging of these supplements because while the FTC were able to have three manufacturers of these products change their packaging to avoid misleading claims, the products are still available.
9 – Title Insurance
Title insurance is an unavoidable cost when you have a mortgage, but be careful of how much you spend. The costs can vary significantly between states, for example insurance on a $500,000 home in Houston can cost $3,000 but in Boston you’ll get away with $2,000 in insurance. Also be careful who your real estate broker recommends, as you will be paying for your insurance, as well as for the referral fees paid to your broker.
Instead, take some time to shop around and to save even more. Contact the insurance company used by the previous owner; they know the property and will have almost all the information you need, so the insurance company can often offer you a very affordable rate.
10. Cable TV
When you have pay TV, there are hundreds of channels and thousands of shows which go unwatched. You know this, which is why you want a basic cable package. Unfortunately your cable company knows this too, but they want you to pay for those channels anyway. As a result they’ll bundle the channels you want with ones you’ll never want to see, just so you will pay for them all.
If you think this is unacceptable, try and go without the cable all together. Whenever you’re looking for something else to watch, visit sites like Hulu where you can watch movies and TV series for free at anytime. If you want entertainment on tap you can also subscribe to Netflix for just $9 a month and have access to over 100,000 TV shows and 12,000 movies on DVD.
This is a guest post from Timothy Ng, who lives, breathes, and sleeps personal finance! Check out his in-depth guide to doing a balance transfer for life where he answers everything you need to know before applying for a lifetime balance transfer.