Anybody with a credit card will eventually get a call, a letter, or a reminder in their statement saying that they should have credit card insurance. So if you haven’t heard of this yet, chances are you will. Credit insurance is a type of coverage designed to pay off the minimum monthly payment in the event that a credit user cannot make their payments. The credit card company that issued you the card WANTS you to have this insurance. They make it very clear what it is and the advantages for you for having it. It’s a simple process, all you have to do is give the go-ahead and they’ll sign you up right away.
A typical credit insurance policy offers:
- Voluntary enrollment, usually a “yes†from you.
- You can cancel any time
- Rates are same regardless of age, gender or health
- Premium fee calculated on current monthly balance
- Benefit of minimum monthly payment if borrower is disabled or unemployed
- Personal credit rating maintained in good order in
Whatever an issuing bank calls their credit card insurance, this type of coverage is almost universally a bad deal for the consumer. The expense of credit insurance outweighs the potential benefits, a bad idea that exploits consumers in the name of protecting them.
The average rate of credit insurance is around 75 cents for each $100 of loan coverage per month. This means that if you carry a monthly balance of $1000, the insurance premium would cost you around $8 each month. That may not seem like a lot, but if you have a huge credit balance, the amount will add up.
So is it worth it? Well, it will depend on your situation. They’re targeting less sophisticated consumers who may not understand the so-called protection. They’re also targeting people who they know will end up carrying large balances at the end of each month. These people are in a bad situation already, and they want to add more to the balance. If you belong to one of these groups, then definately this is not for you.
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