Credit Card Insurance

[tanhanivar]

I've got a new credit card (my first, at 34!) and got a call from my bank yesterday to sell me... credit card insurance? As in, insurance to cover my credit card repayments if something happens to my income. It costs 0.79% of each month's balance.

It took us a few minutes before I could work out what they were trying to sell, as I knew the credit card comes with complimentary insurances and I'd rung the bank earlier to clarify how the travel insurance which came with it worked. Finally I pointed out that I'm not planning on running up more credit card debt than what I have in savings and can pay off every month, and that in fact my limit is much, much lower than what I have in savings. Which seemed to be the correct answer, because they wished me a good day and rang off.

Am I missing something?

[dragoncar]

This is so old I'd completely forgotten about it.  Usually it's really expensive and covers only your minimum payments.  It's basically a scare tactic scam.

[Frugal Father]

My first credit card originally had something very similar. Finally, I really thought about it, and realized that there was no way I would ever need it, called the bank, and removed it. What a waste of money.

[AH013]

The pathetic thing is that the way these policies are worded, they don't actually pay off the balance, just allow you to defer payments and stop accruing interest until you can work again.

They only discharge the balance if you become a vegetable or die. Incredibly smart for the banks -- they basically pass off their risk (non-repayment due to death) AND get you to pay for it.

[The Fake Cheap]

Yes, this insurance is an incredible ripoff for most.  One of my cred card charges 0.99% (lets call it 1% for ease) of my balance!  So lets say you owe $10K on a credit card (I'm sure most people in these forms don't) then you would pay 1% or $100 per month for this insurance.  The kicker is that min payments (in Canada) are 2% of your monthly balance!   So you would be paying $100 per month, just in case something comes up and you can't afford to pay $200?  It makes no sense for anyone with the slightest bit of talent in math.   I'm going to be featuring this on one of my blog posts in the future (sorry for the plug).  This issue really gets me fired up, because I feel that a lot of people are actually paying for this ripoff insurance, and almost no one should be.  The banks and credit card company must be just raking in the profits from this.

[ProfWinkie]

CC insurance is a complete riffoff. I used to work an insurance company they had only a 12% loss ratio on CCs. Huge cash cow for company.