In previous years, whenever someone was approved for a credit card they would be asked to purchase “credit insurance”. Most people declined the coverage. These days, it has been re-packaged and labeled a credit card protection plan. Are they worth the extra money each month or is it just another way for credit card companies to make money off cardholders?
Coverages: the particular coverage of each credit card protection plan may vary from card to card, so you will want to take a close look at what is covered under the plan to make your decision. Most of the time, coverage will activate if you become disabled and can no longer work; or if you lose your job. If eligible for coverage, interest will not accrue on your balances, late fees will be disabled for a certain period of time, and you won't be required to make payments. (You also can't use the credit card during this time period). You pay for the protection plan each month as part of your credit card bill – typically a percentage of the balance and if you aren't carrying a balance there is no fee.
Watch Out for Eligibility Requirements: While it seems like credit card protection would be a fabulous deal if you should lose your job or become disabled, it's actually very difficult to put in a claim for coverage. For example, if you are unemployed when you start the plan – you won't be eligible. If you quit your job or otherwise leave it voluntarily, you won't be eligible. If you are self employed, you aren't eligible for the protection plan. If you are a full time employee and have the plan, if you should become laid off there is a 30 days or more waiting period before you can file for your protection plan coverage; and even then you have to prove that you have applied for unemployment benefits.
Fees for Credit Card Protection Plans: On average, the fee is fifty cents per $100 of your balance. Some credit card companies have increased the fee to double that amount. The more you charge, the more you pay for the coverage – and guess what else? Credit card protection plan fees are added to your credit card statement just like a purchase, and so the amount is subject to interest and penalty charges just like any other purchase.
Hard to Collect: As mentioned previously, not only is it hard to prove your eligibility for credit card protection plans, you may find that even after years of paying on the policy that they deny coverage or cancel the plan when you try to put in a claim. Many reports of individuals with the plans have expressed problems using their policy benefits. State Attorney General Offices are inundated with complaints about credit card protection plans, but there is no state regulation for these policies so there is little or nothing that they can do.
Many financial experts argue that you will have more benefits through purchasing your own insurance policies that also cover your credit card bills, rather than using the credit card protection plans offered through your credit card accounts. The premiums are typically lower, the insurance companies are more reputable, and you can work with a local agent to find the best combination of coverages and financial advantages for your unique situation.
This article has been provided by Creditor Web. At CreditorWeb.com you can compare over 100 credit cards from multiple banks and apply for
credit cards online.
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