Credit card protection programs are filled with loopholes…
If you’re thinking about signing up for a credit card protection plan, perhaps you should think again. Offered by credit card companies for a monthly fee, a credit card protection plan is offered as an alternative for people who might not be eligible for life or disability insurance. The idea behind the plans is to provide payment coverage if you lose your job, become disabled or die. The sales pitch for this service includes scare tactics about the damage that could occur if anything happens and you can’t pay your debt. But in many cases, the only protection being offered is to the card issuers, who line their pockets with your money. You may be better off using the cost to pay down your debt or save it for an emergency.
With these costly protection plans come pages of fine print. Policyholders are often left with an agreement full of loopholes that leave them uncovered. One example is unemployment coverage that doesn’t apply if you voluntarily leave your job or are let go for performance reasons. The service can be quite costly, ranging from $0.35 to $0.99 per $100 of debt. A balance of $5,000 would result in a monthly fee of between $17.50 and $49.50. And, if you have other types of insurance, such as death or disability insurance, the credit protection benefits won’t kick in until the other insurance policies pay out first.
In the event you become disabled or become unemployed, these plans typically only pay the minimum on your behalf.
If you choose to sign on for credit card protection, it must include two very important features. First, be sure that there will be no fees applied when your account has a zero balance; and second, that there will be no interest accrued when you activate the plan’s benefits. “Every consumer should read the contract and have a basic understanding of what their benefits are and when they kick in,” says the Consumer Credit Industry Association’s Brigid Burfeind. “Every policy,” he says, “must meet state standards and issuers must also offer a 30-day trial period, during which a cardholder can cancel the plan and receive a full refund.”
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