5 Things That Seem Like Savvy Buys But Are Actually Terrible Splurges

by Amanda Meadows on 20 August 2014 5 comments

We all have an instance in which we thought we were making a smart purchase, but ended up paying unintended consequences. It's so tempting to take up an almost-too-good-to-be-true offer, but here are five purchases that sounds savvy but are actually terrible splurges. (See also: 6 Things That Seem Like Spurges But Are Actually Savvy Buys)

1. Interest-Free Credit for a Limited Time

Many merchants offer no interest loans for a period of time for big ticket items like TVs and appliances.

Why it sounds savvy: You get the item on credit, but then pay it off entirely before the interest kicks in? You're getting the cake and eating it, too. You're beating the system!

Why it backfires: Many people use the "no-interest" lure not only as a temporary excuse for an impulse purchase, but also for postponing paying the bill. Also, too often buyers don't already have the money saved up before making the purchase on credit. It becomes a race against time to pay it off before interest adds up –– a race many lose in the end.

2. Life Insurance for a Child

This is particularly morbid, but insurers sell parents life insurance policies to indemnify them against the death of their children — primarily as a way to offset potential funeral costs.

Why it sounds savvy: Maybe your child will be the next Disney superstar, or the world's youngest astronaut. You've got to prepare for that, right? If anything, God forbid, happens, you want to be prepared.

Why it backfires: The possibility of the unthinkable happening is not very likely. Let's face it, fear is the engine that drives the insurance industry. Sometimes we fall for the false security of unnecessary insurance. If you are not rolling in disposable income, put your money in a mutual fund to save for your child's college education instead of insurance premiums.

3. Credit Monitoring Services

You've seen the ads on late night TV or heard them on talk radio — savvy thieves are scooping up the details of your identity and using those details to make credit purchases or take out big loans, which ultimately harms your credit rating. Scary!

Why it sounds savvy: Services like IdentityGaurd can help track your score, find fraudulent activity, alert you of "identity theft," and offer insurance on any losses –– it's a one-stop shop so that you don't have to worry about any of these problems again!

Why it backfires: Here comes the fear factor once again. Credit monitoring services are very expensive and are another way to reap money from people afraid of fraud. Your financial institution already protects you against fraud and will pay back any lost funds. You would lose a lot more money paying for these services than you could ever have potentially lost in a fraud incident. Instead, make it a habit to monitor your credit yourself. (See also: How to Get a Truly Free Credit Report)

4. Cable TV

With hundreds of channels to choose from, plus plenty of premium movie channels, of course cable TV is worth the cost!

Why it sounds savvy: Television is so much cheaper than going to the movies or other outside entertainment. What's another $10-20 per month on the premium channels? They keep me at home not spending more money!

Why it backfires: We are rapidly moving past the cable TV model. With Netflix, Chromecast, Hulu Plus and other products and services, you can cut the cord entirely and subsist on internet alone for nearly anything you watch. Netflix costs as low as $7.99 per month for streaming-only service, whereas the average cable bill is $86 (which has tripled in the past 10 years). Binge-watching is more fun anyway.

5. Gym Memberships

A gym membership seems like a good way to get motivated to work out more often — after all, you're surrounded by like-minded people, and you wouldn't want to waste your money by not taking advantage of the gym's resources, would you?

Why it sounds savvy: It's time to invest in you, for once. Finally, you can commit to getting healthier in an environment with fewer distractions. What's another $20 per month for access to unlimited classes and all that expensive equipment?

Why it backfires: You start out strong, but eventually it becomes another thing to do. In the end, you don't need money to work out; you just need your body and gravity (and maybe a milk jug). However, this doesn't mean to invest in a home gym either! A compact weight set will do, when you are ready for them. Plus, working out al fresco is more pleasurable, with fresh air, and vitamin D from the sun.

Can you think of any other savvy buys that are actually gigantic money wastes? Please share in comments!

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Guest's picture

I think the gym and zero-interest credit offers are wastes purely based on individual attitudes and characteristics. Those who really have an understanding of and discipline with money have nothing to worry about. The same goes for the gym--people who actually are committed to improving their health and bodies won't find it to be a waste.

The rest I very much agree with. Especially concerning the credit monitoring services. It's a pure paranoia play. And, realistically speaking,you can spend a couple minutes each day (or every other day) checking your credit card/bank activity for fraudulent activity on your own. And, since not all accounts are updated with the credit bureaus frequently, how can a monitoring service actually be of any better benefit over using something like Credit Karma on your own for free?

Amanda Meadows's picture

Eric, I totally agree with you. The main point is that while we all want to be savvy, most of us don't actually game the system. If we did, first month free gym memberships and zero-interest credit lures would not so popular as marketing practices.
And what you said about credit reporting is very true. There are so many ways to check your score for free, plus it's the law! ( http://www.consumer.ftc.gov/articles/0155-free-credit-reports )

Guest's picture
Guest

I thought you would include timeshares.

Amanda Meadows's picture

Because timeshares have been a decades long punch-line, we figured most people were aware of the traps involved in timesharing. A timeshare is basically a money pit!

Guest's picture
Rachel Gibbons

I just canceled cable. So long Time Warner, hello Netflix & Hulu!