Credit protection insurance is, arguably, the largest type of legalised credit card fraud.
I’m of the opinion that it is by far the biggest rip off that banks operate on unsuspecting consumers who do not know what they are paying for.
I’m sure you’ve had the letters, phone calls or personal chats from your bank, offering you credit protection for your card, in case you should lose your job or run into other difficulties that make it impossible to repay your debt.
The banks make the offer seem enticing enough – for around 89 cents per $100 balance, their insurance policy will cover your monthly minimum payment should you become an unwilling victim of unemployment (appealing during these credit crunch times eh?) or disability.
In the worst case scenarios of critical illness or death, the insurance scam will pay off your entire balance, as long it’s no more than $10,000.
The banks pitch their scheme by pointing out that if you have zero balance it wonn’t cost you anything.
However, anyone who looks at this offer closely will see just how big of a scam credit card insurance really is.
Assuming that you have the average credit card balance of around $10,000 then it will cost you $89 per month for a payment protection insurance that will meet your minimum payments should you get laid off or become disabled.
With most credit cards having a minimum monthly payment of $10 or 2%, which ever is greater, the minimum payment required on a debt of $10,000 would be $200.
However, for your $89 per month for this insurance, you can feel safe in the knowledge that should you become unemployed or disabled then this insurance will pay that $200 for you!
Does that sound like a great deal?
Surely, if you can pay $89 per month for insurance for all those months and years that you are in work then surely you can find away to come up with $200 should you be laid off for a few months?
Then again, some people are so clueless with their money that they will quite happily pay and make the banks even richer than they already are.