Understanding Payment Protection Plans

When you accept a credit card offer, you will typically be asked to sign up for a payment protection plan. Before you ignore the invitation to protect yourself, be sure to read the fine print. These protection plans often offer peace of mind for just a few dollars per month. In today’s economy, credit card protection plans make good sense. Here are five reasons that you should take a second look at this type of protection:

1. Low Cost

When it comes to payment protection, the costs are low when you consider the benefits. On a typical credit card, your payment protection benefits are a certain percentage of your monthly balance. For instance, on one major credit card, the cost of the plan is equal to 1.8 percent of your balance. If you carry a $100 balance each month, the cost of your protection is just under $20 a year. When you think about how the payment protection plan can benefit you, its low cost is well worth it.

2. Debt Suspension

Payment protection plans work by suspending your payments for a set period of time when something happens to you. For instance, if you are laid off, disabled, hospitalized, retired or the victim of a natural disaster, you can have your debt suspended for up to two years. While different qualifying events come with different terms of suspension, you can rest assured that if something happens that affects your income, you won’t have to worry about your credit card debt for a period of time.

3. Debt Termination

By paying for payment protection, you can rest easy knowing that your loved ones won’t be responsible for your debt, should you die. In the event of your death, your credit card debt will be terminated, effective immediately. Without payment protection, the executor of your estate or your loved ones may be on the hook for your debt, no matter the size of your balance or their ability to pay.

4. Life Events

Payment protection plans may cover you in the event of certain life events; typically for no more than four months. If you get married, divorce, give birth, adopt a child, move, or even graduate from college, you could see your credit card payments suspended for a few months. This is incredibly helpful when you have other obligations that require you to restructure your budget.

5. Joint Plans

Many consumers question whether or not it makes sense to pay for payment protection when they and their partner are on the same account. While it wouldn’t make sense for just one person to have protection on the account, it does make sense to pay for joint protection. By so doing, you can be sure that you won’t be responsible for a debt that you can’t handle should something happen to your partner.

The next time you apply for, or are accepted for, a credit card, take a second look at the payment protection plan offered by the company. While you may think that you will never have trouble paying your bill, life’s events can get in the way. If you experience a change in lifestyle, it can be helpful to know that you don’t have to worry about how you will pay your credit card bill, if only for a few months.

About the Author: Dawn Douthit is a freelance blogger who writes about the benefit of payment protection plans. If you are looking to claim PPI or just want to compare the market, you can find out more at ppiclaims.uk.com.

Image credit: Images_of_Money / Flickr

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