Stay away from plans for card protection, advices Government Accountability Office
Consumers who are planning to opt for card protection plans may want to heed the advice of the Government Accountability Office and shun those plans. Most of the credit card lenders today offer their card holders the option of choosing card protection plans so they can benefit the customer; however, the plan is designed to protect the issuers more than consumers.
The Government Accountability Office says that card holders who are keen to safeguard their payments against defaults will opt for the debt protection plan which works more in their favor. The amount that card holders have to pay towards this protection plan ranges from 85 cents to over $1 for every $100 that is carried forward on the card. If the fee is considered to be a dollar for ever hundred dollars, then for a balance of $2500, the card holder will have to pay $300 annually in the form of fees. In the year 2009, credit card companies generated a total amount of $2.4 billion in the form of fees for the debt protection plan.
Of the total amount that was generated as revenue, only $518 million was paid out to card holders in the form of benefits against claims. This accounts to only 55% of the total revenue generated. 24% of this revenue was also used to cover administrative costs.
The United States Public Interest Group recently conducted a survey which has revealed that, of the 392 banks that took the survey, only 40 percent complied with the Truth In Savings Act.