|
 Dear
Dr. Don,
Somehow I've gotten signed up on my credit card for what
they call a payment protection plan. I take it that this is like insurance to
pay the credit card company if I can't pay or suspend payments etc.
Is this a good plan to have? It seems expensive --
about 90 cents per $100 charge on my credit card. Thanks,
-- Randy Reluctant  Dear
Randy,
Payment protection plan coverage is a very expensive way of
insuring yourself against the possibility that you can no longer pay your credit
card bill due to unemployment, disability or death.
Paying
90 cents/$100 on a $5,000 card balance is an insurance premium of $45 for the
month. Carry that balance over a year and you're paying $540 to insure that you
can pay off a $5,000 debt. Spend that premium dollar on disability
insurance or term life insurance and it's likely that you would be able to buy
a lot more coverage than what you're getting with these premiums. The
Bankrate feature, "Credit
card issuers seek to insure customers – and ensure repayment of debt," has
a lot more on this topic, as does the FTC Consumer Alert publication, "Credit
Insurance: Is it for you?" If you decide you want
to cancel this insurance, first try working with the card provider and the insurance
provider. If that doesn't work, go to your state's insurance commissioner. You
can also file a complaint with the FTC. The good news with
a credit card is that you can always pay off the balance and cancel the card to
get out from under the insurance premiums. It's often not that easy with credit
insurance written on a mortgage or auto loan. | 
