Released: June 26, 2009

Credit card protection plan can dig a deeper hole

Source: Kayce T. Ataiyero, Chicago Tribune (Free Registration)

In this wobbly economy it seems only logical to want insurance to cover your creditcard debt in the event you suddenly couldn’t make your monthly payment.

Consumer advocates, however, warn against buying such payment protection plans, which they say are costly and, in some cases, provide a false sense of security.

You’ve seen the offers stuffed in with your monthly statement. For roughly 50 cents to $1 per every $100 of your balance, you can buy insurance for you credit card debt. In the event that you are unable to pay your bill, the payment protection plan would kick in and cover either your minimum monthly payment or a fixed portion of your balance for a set term. During that time the credit card company would not report you to the credit bureaus. The idea is to allow you time to get back on your feet.

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