Credit card insurance: is it a good idea?
With today’s economy, you might be incited by offers from your credit card companies to credit card protection insurance.
This product promises to pay your bill if you lose your job, become disabled, suffer an injury and can’t work, or die. If you’re already struggling with credit card debt and your job stability feels shaky, it might sound like a good idea.
But credit insurance, which is also available for other types of credit, has its fair share of critics, and many financial experts say other options, for example life insurance, are more cost-effective.
Let’s have a closer look and know why:
The price you should pay
The cost might not sound like much at first, but it adds up fast. Let’s look at the example: say one credit card company charges 82 cents per $100 of the monthly balance. Sounds cheap, right? Not if you carry a considerable balance like many cardholders do. For instance your balance averages $5,000 a month. The insurance would cost $41 a month – $492 a year. Use that extra $41 for paying down your credit card debt instead.
Now let’s see at benefits you get, or maybe not, from the insurance. Generally credit card insurance pays only the minimum monthly payment while you’re out of work or temporarily disabled. You still accumulate interest charges, and unless you’re disabled or unable to find work for a very long time, the benefit won’t work in full. Also, there may be some limitations on benefits which are worth being checked out. For example the amount of insurance payments may be capped if there are promises to pay off an entire balance in case of death.
Take a magnifying glass and read the fine print – companies love writing important things in fine prints. Read if there is a waiting period for benefits. How hard will it be to collect benefits? And don’t forget that credit insurance from one credit card company doesn’t cover balances on your other credit cards.
Think of alternatives
There is no need in credit card insurance if you have a good life insurance policy. Usually a life insurance policy is enough to protect you and your family from your bills in case you die. If you don’t have life or disability insurance, then search and compare policies and prices. These can provide much broader coverage than credit insurance.
Credit card insurance might be a good idea if you have high credit card balances, little savings and no other insurance. However, most experts are unison in opinion that it is better to find other ways to get protected.
Latest Other Card News
Walmart is finally ready to introduce a new subscription service offering free same-day delivery and fuel discount. Walmart+ was supposed to go live back in July, however, it was delayed due to the COVID-19 outbreak. Now the launch is planned to take place on September 15. The new product will help you order any goods […]
This month, American Express introduced its new tool called MyCredit Guide. The Amex website says: “We believe everyone should know their credit score and have the tools to understand it better.” That’s why the new feature was developed. Using the tool, you can find out your credit score and take a look at your credit report, […]
A virtual credit card is a unique credit card number that is linked to your main credit card account but is different from the physical card number. The virtual credit card number allows to shop online or over the phone without using your physical credit card. The numbers can usually be used once and expire if not used. The cardholders can also delete the numbers if they want or need to.
The results of the 2019 Debit Issuer Study, commissioned by PULSE®, a debit/ATM network, and conducted by Oliver Wyman, a global management consulting firm, show that consumer debit use has skyrocketed in the last year and will keep soaring. In 2018, the number of debit transactions increased by 6.7% reaching more than 68 billion. According […]
Yesterday, on October 28, Uber introduced their new team – Uber Money. According to the official website, it is supposed to work on financial products and technologies to let their customers access, manage, and grow money easier and faster. Uber is expected to develop several new features, as well as make enticing improvements to existing […]