April 29,2009
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Credit Card Protection Protection, Pt.2
Who benefits?What we're seeing is a smooth marketing plan to sell us all on peace of mind during times of turmoil, whether it be the downturn in economic stability with employment plummeting or the always-possibility of becoming disabled or even dying. At least, our credit card payments will be taken care of. Not to appear as negative scare tactics, happy possibilities are also presented like buying a new home, getting married and having children. 'Credit card security' is offered for a 'small price'. No need to worry about it, they'll take care of all the 'credit card stuff' for us.
This all sounds great but does it all gel with reality? According to Mr. Hardekopf, most of it is just empty promises. He written a book on it called "The Credit Card Guidebook." In his book he purports that "These plans are targeted to customers who can least afford them." While it's true that this segment is known to struggle with credit card debt, the benefits delivered do not offer the help they really need.
First off, for those with little or no expendable income, the cost is too high. For every $100 carried in credit card debt, another 50 cents to a dollar is tacked on for protection services. Scale that up to a credit card debt of $10,000, then the associated costs for protection come somewhere in the neighborhood of $1,200 per year tacked on just for protection. To boot, it's even interest-bearing if debt is carried over month-to-month (without which, the protection doesn't offer much anyway).
When you think of it, you can see that the credit card issuer will gain at both ends while almost ever consumer is losing at both. Who is really being protected? To boot, it still remains a fact that the revenues gained are still 'gravy-money' for the issuer because of the 100 - 300% markup associated risk passed on to the consumer.