Credit card add-ons can be tricky to understand especially when you’re trying to figure out what is and is not covered. Credit card insurance, also known as a payment protection plan or credit assurance, can be a tempting add-on in this economy.
Whether job security is shaky, or your bills are mounting up and you’re not sure if you’ll be able to keep up, credit card insurance is meant to help you during those stressful times, providing peace of mind.
Unfortunately, in some cases the insurance could cost you more in the long run than going without and wind up being not as useful as you might have hoped.
Credit card insurance rates depend on the card, but the majority of them will charge ‘x’ amount per each hundred dollars of the balance. Let’s say the company wants to charge $0.75 per each hundred of the balance; if your balance is $800 then it would be $0.75 multiplied by eight. It would cost you $6 per month, which seems reasonable. This is $72 each year; if you do not use this service for five years you will have spent $360 which you could have used to cut your credit card debt in half.
If you do happen to use your credit card insurance there are a number of issues you might have to deal with. Some credit card companies have a cap on how much the insurance pays. Many card companies will also only pay the minimum balance while you continue to rack up the interest charges.
In the case of death some insurance plans will cover the monthly charges, but again there are terms that must be followed. There may be a cap on the amount they will pay, a waiting period for when the benefits will begin; some companies may not immediately be notified that the cardholder has passed away. If you have a joint credit card, the delay of benefits could affect you if you’re unable to cover the monthly billing.
Unsurprisingly, many companies are actually beginning the process of discontinuing payment protection plans. One company was found to be using deceptive tactics to pressure their customers into buying these products. The Consumer Financial Protection Bureau has put credit card companies on notice that they will not tolerate deceptive practices and that the credit card companies will be held accountable for their actions.
As with any additional service, you want to get as much information as possible about the credit card insurance. Become familiar with all the terms and conditions, if you feel you’re paying too much figure out what the cancellation process is, and last but not least, don’t be afraid to say no. If you’re in the process of managing your credit, AmOne is here to help you. We can assist you in finding out your credit score and getting matched with credit repair services to help you fix your credit. Contact us today to learn more.