Why Credit Card Insurance Is A Waste Of Your Time
Once you have applied
for a credit card, it has become a policy of issuers to attempt to sell
you credit card insurance. There are two main forms of this insurance:
- Minimum payment
- Unauthorized use
payment insurance, the pitch is usually that if you purchase it, your
minimum monthly payments will be paid if you happen to be disabled or
unemployed. While this sounds reasonable to some people, there are a few
things you don't realize about this "service" until you need
it. First, actually trying to collect on this insurance is becoming increasingly
The immense paperwork
involved with most claims is only a part of the reason why it is not a
truly "consumer-friendly service". As well, the fees that are
collected for this service are often up to 2% of total balance per month
- which, essentially, can be as much as your minimum payment! It's certainly
not an economically wise premise to double your minimum payment in order
to collect half of the proceeds.
is The Key Word Here
the key dilemma of "minimum payment insurance" is in the name
itself. The fact is, having an insurance which pays the minimum payments
may save you late payments, but does little to pay down your total debt.
Your debt still ends up costing you 500% more than it should in some cases.
Clearly, this benefits your issuer a lot more than it benefits you.
Unauthorized Use Insurance is basically a useless form of insurance, mainly
because your liability for unauthorized use of your credit cards is almost
always limited to $50. In fact, few issuers will even attempt to make
you pay that much. The key to avoiding unauthorized charges is reporting
them quickly. The quicker you report them, the less you will be hassled,
but ultimately, you are not liable for illegal use of your credit card,
no matter what the case.
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