May 13, 2009
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News: Credit Card Protection
Have you ever wondered how you would make your credit card payments if something were to happen and you either lost your job or experienced a serious illness or injury? Not a very pleasant thought. Credit card companies have the answer; card protection insurance. Most lenders offer the protection that come under a variety of names; Credit Safeguard, Credit Shield, Payment Protection. The plans vary from card to card and each comes with their own set of terms and conditions. Some will defer payment for 6 to 12 months or more in case of serious illness, disability, or a layoff. Others will pay off your card balance in full in case of death. And still more will make the credit card minimum payment for a specified amount of time in case of serious illness, disability, or layoff.
If you’re worried about these things, credit card insurance could be an appealing idea; however, there are a few things you should consider before taking this insurance out. First is the cost. Credit card protection is expensive. Most policies charge one dollar for each $100 of the card’s balance. This means if you are carrying a $4,000 balance, you’ll pay a monthly premium of $40. It’s also important to note that if you do need to cash in on the service, the insurance company will only pay the minimum payment due which a large portion goes towards interest. Additionally, interest continues to accrue on the balance. So why not just put the extra $40 towards the balance or better still, pack it away in an emergency fund.
Lastly, credit card protection plans are just that; plans. They are not insurance policies; therefore, they are not state regulated. This means less protection. Additionally, be very careful if you receive a call from anyone claiming to represent your financial institution. Thieves use this scam to trick you into giving them your card information. Don’t give any personal or financial information to any individual on the phone that you do not know.