What You Should Know Before Buying Payment Protection Insurance
You may find a hidden additional fee on your credit card statement if you look closely enough. Depending on whether or not you've chosen to enable it, the cost could be a fixed sum or nothing at all. This payment protection insurance is also known as PPI.
Rapid expansion over the past few years means that nearly all credit card issuers now offer payment protection insurance on all of their products. Proponents and detractors agree on its importance, but one major complaint is that it protects the lender but not the customer.
You can choose to buy payment protection insurance if you want further financial security. Your outstanding credit card amount will be used to calculate the fee, which will then be applied to your monthly credit card payment. So, for instance, the cost of the insurance might be five cents on every dollar you owe on your credit card bill, if you owed a hundred dollars, the cost of the payment protection insurance would be five dollars.
The lack of protection offered by payment protection insurance is a common complaint. Its purpose is to protect you in the event that you lose your job or become unable to work. If you are unable to make your credit card payments and have accrued large balances, you will likely face substantial penalty fees, a drop in your credit score, and a referral to a collections agency.
Payment protection insurance is meant to kick in at these times and keep making payments on your behalf. However, payment protection insurance comes with a long list of requirements. You must have lost your work through no fault of your own for this to cover your obligations.
If you were laid off or were ill, for instance, your insurance might kick in, but if you resigned your job voluntarily, it would not. Many illnesses are not covered, and if they persist for too long, payments can only be made on your behalf for so long.
Therefore, you should give payment protection insurance serious thought before signing up for it. You're free to cancel at any time, but it's still something to consider before spending money.
Did you know that you are not required to use the payment protection insurance that your credit card issuer offers? The Office of Fair Trade recently announced that consumers would be given the option to select their own payment protection insurance provider from among several options made available by credit card firms.
Consumers may now shop around for more affordable payment protection insurance plans from a wider range of providers, thus this change is well appreciated. Many customers report a 50% reduction in monthly costs and expanded insurance coverage.
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