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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 insurance
  • Unauthorized use insurance

Minimum Payment Insurance
For Minimum 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 difficult.

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.

"Minimum" is The Key Word Here
Finally, 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
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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