#2: Credit insurance

Do yourself a favor and steer clear of “credit” insurance, even if you’re worried that one day you won’t be able to make a payment on a loan or credit card.

Most banks, credit card companies, car dealers, and stores offer this coverage, but it’s no bargain! The average rate is about 75 cents for every $100 in loan amount.

So if you carry a $2,000 balance, it’ll cost you $15 in insurance fees each month. That may sound like chump change, but it’s actually $180 a year.

You’re better off either paying off your debt or establishing an emergency fund. (By the way, you can get more details on both of these strategies in 10 Steps to Living Debt-Free.)

Next: #3: Extended warranties