|
Home::Credit
Credit Protection Insurance -- Just Another Consumer Rip-Off
Author : Charles Phelan
Credit protection insurance is a good example of a consumer rip-off that affects millions of people, yet receives little attention in the financial media. Simply stated, you should NEVER buy "credit protection insurance," or a "payment protection plan" or any other similar type of credit-related insurance. Let's take a look at how these programs work and why they are a bad deal for the average consumer.
First, let's dispense with the scam version of this insurance. With identity theft in the news so much lately, con artists have set up telemarketing boiler rooms to call people and try to scare them into buying worthless credit insurance products. Representatives will try to convince you that you're at risk if someone gets hold of your card and starts making fraudulent purchases in your name. When they call, they may even pretend to be from the "security department" of your bank. In fact, they may actually be part of an identify theft ring, with the goal of getting you to disclose personal information over the phone. Or they may simply be trying to make a fast buck by selling you an insurance policy that you absolutely don't need.
Under Federal law, you are limited to a maximum of $50 liability for unauthorized use of your credit card. If you didn't authorize a charge, don't pay it! Follow your credit card bank's procedure for disputing bogus charges. You simply don't need insurance to protect yourself from a situation that is already covered by Federal law!
Now, what about those "payment protection plans" offered directly by the big credit card banks? These are plans that promise to cover your minimum monthly payments for an extended period of time (usually 12-24 months) if you get laid off from your job, become hospitalized due to an accident or illness, or become disabled. On the surface, a plan like this sounds like a pretty good idea. After all, how could you keep up with your payments if you suddenly lost your job or became too ill to work?
Of course, you should not be carrying balances on your credit cards anyway. If everyone paid their balances in full every month, then credit protection insurance would not even exist in its current form. You are charged for the insurance based on the amount of debt you're carrying on the card, so if the balance is zero, then there is no fee. In fact, some bank representatives use this as part of the sales pitch when trying to entice people to sign up for that "free 3-month trial" on their payment protection plan! They attempt to talk you into adding the insurance now, while you don't need it and when there is no cost, in the hope that one day you will start carrying a balance. By then, you'll probably have forgotten you signed up, and you'll wonder what those mysterious charges are on your statement every month.
If you do carry balances on your cards, credit protection insurance is still a very bad deal. To see why, let's look at the math here. A typical loss protection plan costs 85 cents for every $100 of balance carried on the card. So if you're carrying a debt of $5,000 on the credit card, it will cost you $42.50 per month to buy the insurance. Over the course of 12 months, you will spend $510 under this scenario. That's equivalent to paying an extra 10% in annual interest!
A light bulb should be shining over your head right about now. Why not take that same $42.50 per month and use it to pay down the balance faster? Good question. When you consider that most consumers who have credit protection carry it year after year, without ever becoming eligible for a claim against the insurance policy, the amount of wasted money can add up to a truly staggering sum.
Continuing with our $5,000 example, with a typical minimum payment of $125/month, it will take more than 26 years to pay off the balance in full, at a cost of $7,115.42 in interest. By applying that extra $42.50 per month that would otherwise go toward the insurance, for a total monthly payment of $167.50, you'll have the debt paid off in only 40 months! And you'll have saved $5,435.22 in interest charges. It simply makes no sense to waste this money , especially when you consider that the credit protection plan is normally only good for 12-24 months anyway.
There's another important factor involved here. Credit protection is also a bad deal because the eligibility requirements are so very restrictive. When you read the fine print, you'll realize that there are all kinds of situations that aren't covered. Let's say, for example, that you've been fighting a medical condition for some time. So you buy the insurance thinking it's a good idea. Eventually, you end up in the hospital for treatment and recovery. Can you breathe a little easier knowing your credit card payments are covered? Nope. Most of these policies have exclusions for pre-existing conditions. And there are numerous other loopholes that allow the bank to deny your claim under the policy. In view of the lousy math and the restrictive nature of this type of insurance, these programs should really be named "bank profit protection" instead of "credit protection insurance." Instead of spending good money on an insurance plan that you will probably never use, you're far better off applying that same amount toward paying off the debt early.
Article Source: http://www.articledashboard.com
Charles J. Phelan has been helping people become debt-free without bankruptcy since 1997. A former executive in the debt settlement industry, he teaches the do-it-yourself method of debt negotiation. Audio-CD material plus expert personal coaching helps consumers achieve professional results at a fraction of the cost. www.zipdebt.com
Spam emails More free articles Related articles
|
More related feeds |
HUGE CREDIT CARD CRISIS NEXT FOR AMERICA
“The key for the banks,†Manning says, “is to get them dependent upon consumer credit, shape their attitudes towards savings, consumption and debt and to then multiply the number of financial products that they’re buying from that ...Sydney Morning Herald - eBay still 'forcing' sellers to use PayPal
By comparison there are at least 70 or more alternative transactors who provide Consumer Protection under the EFT Code, and who are arguably much safer for Australian consumers. For Ebay to be arguing otherwise, even by implication, ... Mentos diet coke chemical reaction
A Bureau of Statistics survey conducted for the Australian Consumer Fraud . Report Fraud Bank Of America Bipartisan HB 65 Strengthens ID Theft and Fraud Protection for Alaskans Alaska’s Personal Information Protection Act, ... You thought the housing crisis was bad? You ain’t seen nothing yet.
BANK REP: “I just need your signature. Right here, please.†ANOTHER BANK REP: “And it’s free while they’re a student.†What will happen when they do have to pay it back includes nonstop calls to them and their parents. Credit card ... 2000 calorie diabetic diet menu
Amc Theater Movies Lottery Odds Calculator Department Store Credit Cards Insurance Jobs At Home Totally Free Credit Check Mobile Homes For Sale Health Insurance Rates In Massachusetts Mortgage Payment Tables Customer Service Sayings . ... Why Watching TV Makes You Spend More Money Do you think watching ...
A credit card does just that. Why limit your purchases to just Macy’s? Why not give everyone another card to add to the pile of potential consumer debt. Sears did this so well in the 80s with the Discover card that they ended up ... 引用ä¸å›½ç‰¹è‰²è¯æ±‡æ±‰è¯‘英
消费信贷consumer credit services 削å‡æˆ˜ç•¥æ ¸æ¦å™¨ä¼šè°ˆstrategic arms reduction talks (START) å°åº·a comfortable level of living; a better-off life; moderate prosperity å°åº·ä¹‹å®¶well-off family; comfortably-off family ... Open Question: My DVD Drive won't open and it won't show up in "My ...
I have spent hours doing paper work for things such as unemployment, disability, activating credit protection dealing with connect one, Met Life. health insurance and more. I don't know how my benefits are being paid, I am not being ... Contrarian Profits
In fact insurance is, on the whole, a rip-off and I insure as little as possible. But here is another example of our financial ignorance, which has far more dangerous consequences. How often have you heard someone say, 'I would much ... Midstate Home Prices Hit Record High Number of listings on market ...
Chimney Sweep Swindle- The Rip-Off: In a classic bait and switch scam, a chimney sweep calls from a “boiler room†or comes to your door telling you he’s just fixed a neighbor’s chimney and is offering an inspection for the low price of ...
|
|
|
