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10 Money Traps to Avoid

We want you to get the most bang for your buck and be a smart consumer when you shop. That’s why we’ve got to talk about some of the common money traps out there—so you know what to watch out for and how to steer clear.

Picture this: You’re just getting by, minding your own business, and making pretty good progress on your money goals. But then suddenly you get hit with one of the 8 gazillion marketing messages you see every day—it’s a “deal you don’t want to miss” or a “once-in-a-lifetime opportunity.” For a second, you might think about checking it out. Who wants to miss out on a really good deal, right?

But these things aren’t good deals . . . they’re traps. Don’t fall for them. Here are 10 money traps to stay the heck away from:

1. No-Money-Down Plans

So, you’re ready to start adulting and buy yourself a brand-new couch (the one you got from the thrift store 10 years ago finally bit the dust). This is a big deal. A rite of passage even. So don’t ruin it by signing up for a payment plan with no money down.

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Look, putting 0% down might sound like a no-brainer, but the no-money-down trap is just another way to get you locked into making long-term payments on stuff you need to be paying for up front. Never mind the fact that you’re financing something you dadgum sit on—but now you don’t actually own that couch either. Instead of putting no money down, here’s a better idea: Save up some cash and put all the money down!

2. Car Leases

We’ve all been there. You’re driving your old Honda, minding your own business, when your friend drives up in a brand-new BMW with high-quality speakers and heated seats. Fancy.

That beamer looks a lot sweeter than your beater.

Your mind starts wandering. Wouldn’t it be great to trade in your Honda for a nice car—something like that? Who cares if you don’t have all the money for it right now. You can afford the monthly lease payments, right? Wrong.

Look, a fancy car is nice—but only if you can afford to pay for it with cash, people. Leasing is the most expensive way to drive a car. So just don’t even go there.

3. Timeshares

Imagine this: Someone offers you a free vacation. Heck yes! The only catch? You have to come to a “business meeting.” Sounds easy enough. But here’s what’s really going to go down: In this little, innocent-looking meeting, you’re going to get pressured to buy a timeshare (but they’ll never tell you that ahead of time).

Here’s the thing: Timeshares are usually marketed to people who can’t afford them. That’s their whole marketing strategy. And if you do buy one and you ever want to sell it, good luck. You can’t give the dang things away. So, if you’re thinking of buying a timeshare—don’t. You might as well chuck your money in a trash can.

4. Adjustable-Rate Mortgages (ARMs)

About 10 years ago, adjustable-rate mortgages (ARMs) were the hip, cool thing for home buyers. But then the housing market crashed, and a lot of the banks that gave out stupid loans either went under or had to get bailed out. Yeah, turns out it was the banks that needed someone to lend them a helping hand.

Look, it doesn’t matter if it’s a three-year or a five-year ARM—just know that your interest rate is adjustable (which means your rate isn’t locked in and will go up!), and you’ll have no control over it. You’re playing with fire when you get an ARM, and there’s no reason to take that risk. Instead, play it safe with a 15-year fixed-rate mortgage and get that house paid off sooner.

5. Subscription Scams

Okay, we already told you how much we like a good deal. But what we don’t like are shady companies trying to take advantage of you. And that’s what some subscription companies do. Here’s how you can tell a good one from a scam.

If the company starts with a free trial but doesn’t tell you up front what the cost will be after that period of time, that’s no good. Look all over the website. If they're hiding or leaving out this important detail, get out of there!

If canceling that free trial is impossible and no humans are available to talk to, again—no good. Also, if they try to sneak you into payments by hoping to all hope you’ll just forget the day the free trial ends, that’s no fair.

Hey, a free trial can be a great way to test out a service—especially one you're already interested in. Just make sure you know the cost that comes after and the cancellation terms. Just in case.

6. Surprise Contest Winnings

Pro tip: If you ever get an email saying you won a contest or the lottery, but you don’t remember entering, and they ask you to pay a fee in order to claim the prize—it’s a scam.

And do not click on pop-ups that say you won an Amazon gift card or something crazy like that. It might sound like a no-brainer to not click on stuff like that, but you’d be surprised by how many people fall for it. Sorry, we know how much you wanted that Amazon gift card.

7. Payday Loans

Life happens. Sometimes we have out-of-the-blue money emergencies—the transmission goes out, your HVAC unit dies, you have way too much fun on the dance floor at your cousin’s wedding and wind up in the ER with a broken ankle . . .

You panic. Your emergency fund won’t cover the bills, so maybe some quick cash from a payday loan lender would help? Forget that!

These guys are the worst of the worst of the worst in the financial industry. Payday loans are a rip-off. Those people don’t want to help you. They want to take advantage of you and make you end up paying crazy, ridiculous interest for that loan. As tempting as it might be to go this route when you’re desperate—don’t.

Here’s what you can do: Make sure you have an emergency fund. Pick up an extra job or side hustle. Sell some stuff you don’t need. But whatever you do, stay away from the slimy payday loan sharks.

8. Investment Scams

Don’t ever give your money or personal information to someone who offers unwanted investment advice or pressures you to invest in something “right now” so you don’t “miss out.” That should send up all kinds of red flags in your mind. You might even get a phone call or email that seems legit, but watch out if they promise a high return with zero risk.

Just like your grandma always says: If it sounds too good to be true, it probably is.

9. Credit Cards

Let’s be real: Credit card companies hook you by offering you all this free stuff just so you’ll sign up. Yeah, we know you want the free pizza and T-shirt that come with applying for a credit card, but before you know it, you’ll rack up a ton of debt like it’s nothing. So when the sleazy credit card companies come calling, just do one thing—run.

And don’t even get us started on those stupid reward points they promise you. All the airline miles, cash back and discounts are just strategies to get you to use credit cards more—and go into debt because of it. And once you factor in taxes and hidden fees, the rewards end up being way less rewarding than you thought. Don’t play the credit card company’s game here. It’s just not worth it. Be smart and keep more of your own money in your pocket.

10. Student Loans

The huge lie that you have to take out student loans to be able to afford college is maybe the biggest money trap in our country today—and it’s led to a more than $1.7 trillion student loan crisis.1

Here’s a truth bomb for you: There are plenty of ways to pay for college without loans. You could save thousands on your education by doing things like choosing an affordable school, applying for grants and scholarships, tuition reimbursement, having a job, and knocking out some credit hours at a community college before transferring to a four-year school. Trust us, the student loan industry doesn’t want you to win—they want to take your money. Don’t give it to them.

If you want more tips on avoiding debt like the plague, check out our book Debt-Free Degree. It’ll give you a step-by-step plan for cash flowing your college education so you can graduate with zero debt and be ready for the future!

Ramsey Solutions

About the author

Ramsey Solutions

Ramsey Solutions has been committed to helping people regain control of their money, build wealth, grow their leadership skills, and enhance their lives through personal development since 1992. Millions of people have used our financial advice through 22 books (including 12 national bestsellers) published by Ramsey Press, as well as two syndicated radio shows and 10 podcasts, which have over 17 million weekly listeners.

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