credit protection plans

Discussion in 'Credit Talk' started by steve, May 31, 2001.

  1. steve

    steve Well-Known Member

    I'm getting calls about this a couple times a week but I'm still not sure how it works. I think you are charged like 69 cents for every $100 balance on your card for the service. If you have no balance you don't have to pay anything. What does "balance" mean in this context? If you pay your bill in full every month, are you still charged for credit protection or are you only charged if you carry over a balance from the previous month(s)?
  2. sam

    sam Well-Known Member

    i believe average daily balance. This is a good plan to use if you have a card that you don't do much with. If you get laid off. Cash advance yourself your whole line and then activate the protection program.

    otherwise its a ripoff. Effectively 8-10% more interest
  3. breeze

    breeze Well-Known Member

    It's not a rip-off if you lose your job or get seriously ill and cannot work for a long time, and do not have money to pay your credit card payment. There are people on this board who had to file bk7 because of things like that, and are now rehabbing and repairing their credit.

    As far as when they calculate the balance, it is "month-ending account balance" meaning on your closing date on that account.

    In some states it will also cover unpaid leave of absence from work, such as family leave, which the law allows.

    Coverages, restrictions, and cost vary by company and state. As with all insurance you consider purchasing, you should read the fine print. It is not intended to be tricky, but it is the contract, and you will only get what it says you will get. It does not cover self-employed individuals. Usually, you have to have been out of work for 1 month before it begins paying, but it will go back and pick up the first month which you had to pay. In this, it is similar to disability insurance (elimination period). It is not underwritten, everyone can get it, and unless you're carrying huge balances it is affordable (how much do you spend on CD's and DVD's?)

    What you are insuring is your credit!! Not your card.

    If your card doesn't offer it, or offers a different version of it (like Providian), I can tell you where to get it.

    Whether or not you need it varies with your situation, and if you have other resources to fall back on, then it would be foolish to pay for the insurance.

    Personal risk management is a foundation for any kind of financial stability - and we are all here because we want that. And if you are carrying the minimum liablity coverage on your vehicle, or don't have renter's insurance, etc etc etc, you are neglecting a very important aspect of your financial situation.

    breeze (the agent)
    ps - no disclaimer - feel free to consider this my professional advice. ;)

    GEORGE Well-Known Member

    Only minimum payments are made to your account...and usually lasts one year.
  5. Marie

    Marie Well-Known Member

    I forget who had this one, but I read a credit protection plan that didn't even make mins. It simply postponed your payments.
  6. breeze

    breeze Well-Known Member

    That's Providian. It puts your account on "hold" - no payments due, no interest added. Cost is a flat amount per year.

    The best I understand - this is not insurance, even though involves a possibility of an event occuring in the future which causes a loss. No license is required to sell this, and it is not regulated by the state insurance authority. I am a little gunshy - I guess, because I know you can make an insurance company pay a claim. Not so sure about a credit card company. :/

    The other kind is a mixture of life, health, and casualty insurance. The person selling it may or may not be licensed, depending on the state, but an agent must be "on the premises."

    I had to laugh - I train the agents who work in a call center here. I referred to this as "credit insurance" and got a memo from their main office informing me "this is NOT credit insurance, it is account protection." I sent a memo back and said "I'll be glad to call it whatever you like, but be assured, it IS credit insurance." Marketing people!!! LOL. call it something else.......

  7. godaddyo

    godaddyo Well-Known Member

    Anyone ever listen to Clark Howard " The Consumer Warrior"? He has an interesting point to make about extended warranties and credit protection plans on his website. Some people believe that if you are handling you finances correctly and if you have money to fall back on, you should pass on credit life and extended warranties because the money you will save in a lifetime will outway the money you will save from purchasing these extras. Although, if one does not have a good solid financial status in the beginning, they may need these extras to protect themselves. Breezes point is well taken.
  8. breeze

    breeze Well-Known Member

    Thanks godaddyo :D

    I love Clark Howard's site!! I like The Motley Fool, also - but all those folks give blanket advice without regard to an individual situation. All they have to do is put a disclaimer up. Then, if their advice causes you serious financial harm, there is nothing you can do about it.

    It's easier to get credit cards, than it is to discipline yourself to pay premiums and put money away in some kind of savings vehicle. TMF addresses the credit card issue by ignoring the realities of the need for credit in our society, IMHO. I'm sure those of you who read their credit message board will agree.

    Sometimes it's hard to decide exactly where to put your money, when you don't have enough to cover all the bases ( and who does?)

    I think, because of that, consumers want to hear certain things, so they listen to bad advice, or only hear the part they want to hear, rather than think for themselves.

  9. godaddyo

    godaddyo Well-Known Member

    Your ablsolutely right, there are different ways of approaching your finances. I think that the point is "If you dont have enough money for those emergencies in life, you may need to reevalute the current budget you are abiding by. Credit should be used because you either A)need to buy an appreciating asset that supplies income or pays the debt down or B) the big ticket items in life(House or college education.C) to use as a defensive measure instead of a checking account and for the convenience. When people dont follow those three rules they seem to get over their heads in consumer debt...

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