8 Tips for Credit Card Protection Plans

Credit card protections plans are sold to consumers as a safety measure to help consumers when in reality it is just another money making tool for credit card companies. The credit card companies make hundreds of millions of dollars a year and the recession is just another easy way for credit card companies to scare consumers into purchasing a protection plan. You also have to be careful about credit card protection plans scams. Here are 8 Tips for to consider when purchasing a Credit Card Protection Plan.

1. Credit card protection plans are similar to insurance plans used to insure credit card accounts. Some plans may or may not charge a fee to "protect" your credit card account. Read the agreement carefully before signing or ask the company for an explanation of the terms of the plan. The protection plan exempts you from payments, interest and fees and does not affect your credit score.

2. Plans usually require you to be under age 65 to enroll and be employed full-time. The plan covers crises such as: disability, unemployment, theft coverage, or if you are nable to make the payments. However, coverage is not available in every state. Verify if the plan covers self-employed workers and those who work less than 30 hours per work. Over-the-limit and past due accounts may not be eligible for coverage.

3. The price of the plans varies from state to state but usually ranges from $.35 - $.95 per $100 of your account balance. This adds up quickly when including the monthly finance charge, any late fee, over-the-limit fee or annual fee.

4. This can make it difficult to pay down the balance because the plan fee is added to the finance charge. Instead of your minimum monthly payment being applied to the principal or finance charge on your account it will be applied to the: plan fee and finance charge which will make your balance go down at a slower rate especially if you have a high credit card balance.

5. If you already have home, car, or life insurance, you may already have enough coverage. If you don't carry a balance on the credit card you may not be eligible for coverage.

6. The length of time to process claims can take up to 30 days and usually the claim payment is applied later which can cause your payment to be late. If you file a claim you cannot make charges after the claim is filed because they are not covered during the claim period. Claim payments are made based on the amount owed on the account at the time the claim is made.

7. Your maximum liability on a credit card is $50 per card, and if you report a lost or stolen credit card right away it is zero so it doesn't make sense to purchase a protection plan.

8. You can create an inventory of all of your credit and debit cards and list the following information for each: account number, mailing address, toll-free number, and interest rate. Review your credit card statement each month to verify all charges and check for errors.