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Stop right there. Put your money away. A lot of people are after your cash, and you, quite understand_ably, would like to hold on to as much of it as you can. It won't be easy: Last year, Americans frittered away more than $1.2 billion on dubious deals, an average of $2,057 for every consumer, according to the Federal Trade Commission. How do you tell the bargains from the boondoggles? Here's a look at seven offers that often don't pay off, plus smart ways to save your hard-earned money.
1. Travel Discount Clubs
Vincent and Linda Schreckenberg were vacationing in Branson, Missouri, when they were offered an enticing deal: free tickets to a show in exchange for attending Travel More Now's 90-minute sales presentation. "We had no intention of joining a travel club," admits Linda, 58, "but the sales reps told us we could go anywhere we wanted and that everything-restaurants, cruises, hotels, airfare-would be drastically discounted."
The Schreckenbergs balked at the $8,000 membership fee until the salesperson got it down to $2,604. The couple paid with their MasterCard and signed a receipt for gift cards, for a free celebratory dinner at Red Lobster.
That night, 60-year-old Vincent, who suffers from high blood pressure, was rushed to the hospital with a nosebleed. Worried about medical bills, he and Linda regretted having spent so much. They checked their contract, which had a cancellation period of three business days, as required by Missouri law. Following the instructions, they mailed a notarized cancellation letter to Travel More Now and returned the membership packet.
So why did the club refuse to refund their money? "They said we'd accessed the membership benefits by eating at Red Lobster," says Linda.
Their story didn't surprise Missouri Attorney General Jay Nixon. He had sued the club in 2003 for allegedly "failing to give consumers clear and conspicuous notice of their right to cancel … and, in fact, [advising] consumers that they could not cancel." But a judge ruled against Nixon; he could do nothing for the Schreckenbergs.
"It's outrageous that this club found some loophole to get around the law and nobody can do anything about it," says Linda. Travel More Now spokesman Travis Dunnahoe says, "Anyone who accesses benefits, in any way, at the time they acquire a membership signs a form that is titled in all caps 'Member Benefits Access Form.'"
Consumers have filed thousands of complaints about travel clubs with the Better Business Bureau in the past three years. "The clubs promise insider deals, but people can often get better prices on their own," says Travis Ford, consumer educator at the Missouri Attorney General's office.
The best advice: In general, clubs that charge more than a few hundred dollars are likely to be rip-offs. Avoid going to an in-person sales pitch. "You may think, No way am I going to buy anything, but the salespeople have answers to your every objection," says Susan Grant, director of consumer protection at the Consumer Federation of America. "The deal is good for only one day, or the price keeps going down if you say you can't afford it-those are hallmarks of a scam."
2. Cell Phone Replacement Insurance
When Tessa Lewis's pink Motorola SLVR cell phone broke, she expected Asurion, her insurance carrier, to replace it with an exact duplicate. "They charged a $50 deductible, then sent an ugly, used black flip phone," says Lewis, 45, a nursing assistant in Lexington, Kentucky. "It wasn't even close in value to what I had."
Lewis, who admits she hadn't read her contract, was even angrier when she realized how much she'd wasted on premiums. "I'd been paying $5 a month for two years. Tack on the deductible, and I was out $170 to cover a $99 phone," says Lewis. After she found the same pink phone on eBay for $50, she canceled the insurance.
David Wood, a telecommunications expert at consumeraffairs.com, has received numerous complaints about cell phone insurance. "Very few consumers read their policy," says Wood, "which typically says the phone only has to be 'comparable.' It could be a totally different model, so you may have to buy a new headset, charger, and other accessories because the old ones aren't compatible. Or it may lack the bells and whistles you value, such as a camera or an MP3 player." What's more, you'll usually receive a refurbished phone, not a new one.
In response to consumer complaints, Maryland's attorney general announced an agreement in April requiring Asurion and the major wireless companies to clearly disclose key provisions in the insurance contract. (Asurion has not replied to Reader's Digest's request for a response.)
The best advice: Skip the cell phone insurance unless you have a high-end device like a BlackBerry or Treo or your teens tend to lose their own expensive phones. Most insurance plans give you up to 14 days to enroll after you buy a cell phone, so take the contract home and read it carefully.
3. Mail-in Rebates
Dane Madsen loves a bargain, so when he spotted a $100 rebate offer on $699 Lenovo laptops at Office Depot, he bought two. The cashier scanned the product codes, prompting the store's computer to spit out the rebate form for that model. But when Madsen, 50, mailed in the forms along with the required proofs of purchase, the rebate center told him that the laptops didn't qualify for the rebate. That's not unusual: The centers typically reject 33 percent of claims.
"The rebate company blamed it on Office Depot, and Office Depot claimed the rebate company had goofed," says Madsen, a clothing-store owner in Las Vegas. "I never got the $200, and one of the laptops failed soon afterward. Because I didn't have the box label-the one I'd sent in for the rebate-I was also denied warranty coverage." After Reader's Digest contacted Office Depot, the company notified Madsen that it had resolved the matter and would be sending the rebate.
"It's a ridiculous system," says Ed Mierzwinski, consumer program director of the U.S. Public Interest Research Groups, an advocacy organization in Boston. "Consumers are put through a rat maze of requirements that they have to complete perfectly in order to get their rebate."
The best advice: Even if you do collect, a mail-in rebate may not always be the best deal. Shop around to see if you can get a lower price without the hassle. Some companies, including Staples, Costco, and Rite Aid, offer paperless rebates. Just log on to the store's website to enter the required information. The advantages: You don't have to bother with proofs of purchase, you can track the status of your claim online, and you'll get your check sooner.
Watch out for rebate checks that are designed to resemble junk mail; some consumers have tossed them by accident. Companies no doubt count on that.
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