It used to be that when you applied for a credit card, you were asked to buy credit insurance as well. You don’t hear about credit insurance as much today, but there is something else you can buy: a credit card protection plan. If you look at it closely, however, you’ll see that it’s pretty much the same thing as credit insurance. These plans offer coverage to help consumers in the event that they are unable to make their credit card payments, while providing another method that credit card companies can use to profit from their cardholders.
Credit Card Protection Plans: Are They Worthwhile?
Before you buy a credit card protection plan, make sure you know what it covers. The terms for these policies vary from one card to another. Most policies cover your payments if you are disabled as the result of an injury or lose your job. The premium for the plan is usually a percentage of your balance each month. If you have no balance, you usually do not pay a fee for that month.
When you attempt to make a claim, you may discover that the plan doesn’t cover you as well as you thought it would. For example, you might be disqualified because you were unemployed when you signed up for the plan or because you left your job voluntarily. You might even discover that there is waiting period after you become unemployed, during which time you are ineligible to receive any benefits. You might also be required to apply for unemployment benefits before you will be eligible for coverage under the credit card protection plan.
Credit Card Protection
The fees for these plans are usually around 50 cents for every £100 that you owe, but they can sometimes be as high as £1.00 per £100. These charges are added on to your credit card balance as if they were ordinary purchases, so you also have to pay interest on them. It is also possible for them to push you over your limit and incur over-the-limit fees.
Most states do not regulate credit card protection plans, so you will not receive much help if you have trouble when it comes time to make a claim. Many people who have paid for these plans report having issues with not being able to use the benefits that they have paid for, so be cautious about purchasing credit card protection plans for your credit cards. You may discover that you are better off buying regular disability insurance or some other type of insurance instead of a credit card plan.