Right now, many people are worried about their ability to make payments on their credit cards. What happens if they lose a job? Or if something else happens? In this economy, one can’t be too careful. This is why credit card payment protection plans are starting to gain in popularity — and why credit card companies are taking advantage of fears and becoming active in advertising them.
What are credit card payment protection plans?
Credit card payment protection plans are basically insurance coverage. You pay a premium each month, and if something happens and you are unable to make your credit card payments, the payments are made for you (well, minimum is). While this sounds like a good idea, there are some definite reasons that you should think twice about credit card payment protection plans:
- Cost. It seems like a very little. You pay 75 cents per $100 of your balance, and it “only” comes to $7.50 per month if you have a $1,000 balance. However, the premium is added to balance, and you start paying interest charges on the premium each month. Plus, if your balance goes up, so does your premium.
- Limitations. With credit card payment protection, you are only protected on the applicable card. None of your other low apr credit cards are covered. You have to get a plan for each, and that can add up quickly.
In truth, you can get coverage for debt repayment with most disability plans — and life insurance coverage works as well. But the best defense is planning ahead by reducing your expenses and setting money aside for savings.
