Credit Card Protection – Too Many Loopholes
You may be worried about job loss in the future, or if the state of your health is questionable, you may worry about being unable to work due to illness.
Those worries could cause you to consider opting in to a credit card protection offer from your credit card issuer. But think twice and do your research before you make the decision. If you know your company is about to announce widespread layoffs, it might be a good idea – but only if you’ve read the fine print and know that the coverage will actually be there when you need it.
Some plans require that you’ve been employed for a set length of time, that you’ve had the coverage for a set length of time, and that you’re a full time employee. They may also state that the coverage doesn’t extend to existing medical conditions.
Many programs require you to wait for coverage until you can show that you’re receiving unemployment benefits. And that, as you may know, takes a couple of weeks. If you’re off work due to illness, the coverage may require you to send in a monthly note from your doctor.
Job loss from disability may be non-existent, due to the fine print in some plans. These state that you must be physically unable to perform any work for pay. So, if you make your living climbing tall structures as a steel worker and you suffer from a broken leg, you may be out of luck. Why? Because that broken leg wouldn’t prevent you from taking a job as a bookkeeper, a telemarketer, or anything else you could do while seated.
If you read all the fine print and determine that yes, the coverage is genuine, then you need to consider the cost vs. the risk you face.
Credit protection plans can effectively increase your overall cost of credit by more than 100%. The offer is presented to look inexpensive – only 99 cents per $100 per month.
That doesn’t sound like much, until you apply it to your entire balance and compare it to your interest charges. Say you’re carrying a balance of $2,000 at 9.9% interest. Your interest charge is about $16.50 per month. Now add the fee of 99 cents per $100. That’s 99 cents times 20 – or an additional $19.80. Ninety-nine cents per months translates into 11.88% per year if you were calling it an interest charge.
Some card issuers charge less – perhaps 50 cents per $100 – that’s still an additional $10 per month that you could be using to pay down the debt instead.
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