Credit Card Payment Protection Plans Made Easy

Chances are you were offered credit card payment protection when you first signed up for your card. Hopefully you looked in to this offer. There are many plans available to help protect you and your credit if something happens and you aren’t able to make the payments as planned. Here’s what you need to know.

What Is A Credit Protection Plan?

A credit card payment protection plan works as an insurance policy. In the event that you are unexpectedly unemployed or facing another financial hardship, the plan serves as a way for you to continue to make your payments without sending any money to the credit card company. The protection plan will make the payments on your behalf if this happens.

How Does It Work?

Most credit card companies will offer you the option of signing up for some type of credit card protection when you first sign up for their card. In general the cost for the credit protection will be billed automatically to your credit card. The premiums for the protection are usually based on the balance you are carrying. In most cases it’s about 1.5% of the overall balance. It could be higher or lower depending on the credit card. If you carry no balance then you are charged nothing and there is no coverage available.

Is It Worth It?

This depends on you and your situation. Check with your other insurance policies to see if there is any protection already offered for you. In some cases you may already be covered through a life or home insurance policy. If this is the case then you will just be throwing money away if you sign up for another plan. Many people like to have the coverage as a ‘just in case’ thing. The coverage makes them feel safer knowing they have it. If you don’t carry high balances and want some piece of mind, it’s probably not a bad idea to have the coverage.

What Does It Cover?

What your credit card protection plan covers is completely dependant on the plan itself. Usually the protection plans will cover:

Life- In the event of your death the balance may be paid in full. This can protect your family from having to pay the credit card debt.

Disability- If you become disabled and unable to work, the protection plan may cover your monthly minimums until you are able to work again. This is usually only for a short period of time, but can bring you a little more piece of mind.

Unemployment- If you are laid off or find yourself unemployed, the plan may cover your monthly minimums until you become employed again. The caveat to this is you usually must lose your job though no fault of your own.

Some plans offer additional coverage, such as theft of merchandise that was purchased using the card. Most credit cards offer this anyhow. There may be additional perks to the credit protection plan you are offered. Just be sure to keep a copy of the terms and conditions and read the fine print.

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