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Written by
Raychelle Heath
Edited by
Liliana Hall
Liliana is an editor and journalist with a background in feature writing on the Bankrate Credit Cards team.
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Whether you’re tapping your card at a contactless terminal or shopping online using tokenization, credit cards are one the most secure ways to make a purchase.
This is due to the strict consumer protections in place for credit cardholders. You may already be familiar with how your card protects you from fraud. However, you may also have travel protections or rental car protections included as benefits in your credit card agreement. Depending on the card, these types of protections are made available to anyone with an eligible account without taking further steps.
But there’s another kind of credit card protection that comes with its own price tag: credit card protection insurance, which may also be known as “payment protection,” “credit shield” or “credit safeguard.” This add-on protection is meant to help if you fall into financial hardship and have difficulty making your credit card payments.
Credit card protection insurance is a form of protection offered by many card issuers to help cardholders in times of financial difficulty.
It’s a way for card issuers to offer cardholders a break from making payments until they get back on their feet. Credit card protection insurance is separate from other protections that may automatically come with your credit card. You have to apply for it and the cost will depend on how much you spend on your credit card each billing cycle.
Though the terms will vary by issuer, protection insurance allows you to pay a fee to your issuer now in exchange for leniency if you are unable to make payments in the future. For instance, you may be granted payment and interest suspension for up to two years, have your minimum payment lowered or have your account continued to be reported as current to the bureaus as part of your plan.
If you find yourself facing financial hardship due to loss of employment or a disability, protection insurance can offer you a break from your payment obligation, which can help you avoid some of the very serious consequences of missing payments. And in the unfortunate event of your passing, your credit card balance will be cleared.
These can be very valuable benefits if you’re short on savings and dealing with long-term financial hardship.
Your protection insurance fee will incur monthly. The cost generally depends on your monthly spending; the more you spend, the higher your fee. This cost can add up over time, so it’s important to consider whether you’re willing to pay.
But while a credit card protection insurance policy can offer a great deal of protection, it isn’t the only option on the table. Especially if you’re facing financial difficulties, you may have more success by reaching out to your credit card issuer directly for assistance. Card issuers are stepping in to help support customers with assistance plans that won’t come at any extra charge to you.
Whether you should sign up for credit card protection insurance or not may depend on a number of factors.
First, consider your finances — especially your savings. For example, if you have enough savings to cover expenses in the event of an emergency, this protection insurance may not be necessary.
Your current debt balance may also be a deciding factor. If you have a large amount of debt that you’re working to pay down, it may not be a bad idea to have credit card protection insurance. In case of emergency, it would allow you to suspend your credit card payments for a time and prioritize debt that can’t be suspended.
Other factors to consider may include your lifestyle, health and job security. If you have an extreme hobby or work in a high-risk field where you may be prone to illness or injury, having credit card protection insurance could be a great help. This is also true if your job has a high turnover.
Just be sure to read the coverage agreement carefully before signing off on any insurance plan to make sure that you’ll be covered for your specific needs.
While there are credit card protection insurance plans out there that can be a great support for people in financial need, there are also third-party providers out there charging for coverage that isn’t helpful at all.
These third parties may present fake policies that claim to cover fraud and protect your information, but they can result in you losing money or even access to your credit card account altogether. They may even claim to be contacting you from your card issuer; if someone calls you under this pretense, do not share your personal or credit card information.
Do your research on any company offering you protection against fraud or hacking. If you are interested in a particular service from your card issuer, including credit card protection insurance, you can contact your issuer directly. And always read the fine print of any agreement to ensure you know exactly what you’re signing up for.
While there are certain standard protections available with every credit card, such as $0 liability for fraudulent purchases, additional benefits and protections apply for certain cards. These benefits are meant to specifically offer protections for the purchases you make and come at no extra cost to you.
So, is credit card protection insurance worth it? It all depends on your financial situation, but in the case that an unplanned life event throws a curveball at you and your finances, it may be the right move. If you decide to move in this direction, carefully review the terms and conditions so you fully understand what it is you are agreeing to.
