Do You Need Credit Card Protection?

If you’re worried that you may not be able to meet your credit card repayments in the future, you may want to consider credit card Payment Protection Insurance (PPI). This will cover you in the case of accident, sickness or unemployment – it can also apply to the repayments for personal loans as well as for credit cards. However, it is important to know what level of compensation you are paying for and whether your PPI is really worthwhile. Before you take out a PPI policy, here are a few points to be aware of. 1. The cost: PPI can be expensive – if you already have a policy, it may be costing you around 70-80p per £100 of outstanding balance on your card. If you’re using a direct debit to pay off your bill in full each month, you should also be aware that your PPI may be pointless, since by the time you claim the direct debit would have paid the full cost. 2. The pay-out period: Very few PPI policies will continue paying off your credit card indefinitely. The pay-out period will almost certainly be limited – most policies only foot the bill for a maximum of a year. This may be sufficient to pay off the balance of your loan, but be sure to read the small print before you make the commitment. 3. Getting a cheaper deal: Instead of taking out PPI with your credit card company, consider shopping around for a better deal. Contact large insurers such as Co-operative Insurance to see if they will safeguard your credit card or personal loans, and use price comparison websites like Beat That Quote. It’s also worth taking a look at Paymentcare’s credit card PPI, which costs only 65p per £100 of your outstanding balance. If you are under 35 then you may be able to save even more by using a standalone payment protection insurance provider. 4. Staying covered: Make sure that the PPI policy you choose will cover you sufficiently in case of accident, illness or unemployment. With standalone providers you are generally required to pick the level of cover you want and you are then charged accordingly. Bear in mind that your insurance will only cover the level specified, so be sure to keep an eye on your outstanding debts and increase your cover level if necessary. 5. And finally: Think carefully about whether you really need PPI. Policies are expensive and, depending on the level of your debts, it may work out cheaper to take the risk. Remember that PPI can be taken out for almost any outstanding debts and is not limited just to credit cards.