If you check your credit card bill carefully, you will notice that there is sometimes an optional extra charge there. You may have selected it and in that case it will cost you a set amount, or it may be that you have not selected it and in that case it will be zero. This payment protection insurance or PPI. Payment protection insurance has grown rapidly in the last couple of years and is now offered by virtually all credit card providers, on all of their products. It has had both praise and criticism, with one of the strongest criticisms being that it offers the customer no protection at all, and only protects the lender. Payment protection insurance is an optional insurance cover that you can pay for. The cost will be added to your monthly credit card bill and will typically be assessed on the basis of your outstanding credit card balance. So, for example, the cost of the insurance might be five pence on every pound you owe on your credit card bill, so if you owed one hundred pounds, five pounds would be added to the bill as the cost of the payment protection insurance. One of the fiercest criticisms of payment protection insurance is that it will not offer any protection. It is designed to guard you against such possibilities as losing your job or becoming unable to work. If you become unable to meet your repayments on a credit card, typically what happens is you will become subject to harsh penalty charges, your credit rating will be severely damaged, and eventually the debt will be referred to a collection agency. What the payment protection insurance is supposed to do is step in in such situations and continue making the repayments on your behalf. However, there are very strict conditions attached to payment protection insurance. It will only meet your repayments if you have lost your job through no fault of your own. So for, example, if you are made redundant, or become ill, the insurance might step in, but if you simply quite your job, it will not. Also, there is the issue that many forms of illness will not be covered, or if they last too long, the repayments will only be kept up on your behalf for a limited time. Therefore, you should consider carefully before committing to payment protection insurance. You can cancel it at any time, but it is one more expense that you should think about before incurring. Many credit card companies make you choose their own payment protection insurance, however, did you know you did not have to? Just recently the Office of Fair Trade announced that credit card companies were to allow consumers to choose their own payment protection insurance from a third party. This move is a welcome relief to consumers as now they can take their pick from a variety of payment protection insurers at a lower cost. It many cases consumers have found their payments have been halved and that they have more insurance cover than before. |
