Credit Protection

I got my credit card statement the other day and I saw something that made me really mad at myself. No, I didn’t overspend; I realized for the first time that I have their “credit insurance”. It’s called different things with different credit cards but the idea is the same with each. They charge you a small percentage of your balance and say they will pay your minimum payment if you are laid off or become disabled. They will also pay off your entire balance if you die. You are usually signed up automatically when you open a new account. I can’t say it’s a scam exactly but I’m here to tell you it’s pretty hard to actually qualify for the benefits. If you have this on your credit card call and cancel it right away. This service costs about 80 cents for every $1,000 of balance. So for an $8,000 balance you would pay about $6.40.

I’ve mentioned before that I used to work in credit card customer service. I talked to over 100 people a day for two years about their credit card accounts. That means I’ve worked on over 50,000 credit card accounts. Do you know how many people I’ve seen that actually received benefits from the “credit protection”? One. ONE! One person out of 50,000. I’ve worked with dozens of people while they were trying to receive benefits and were eventually denied. I’ve seen lots of accounts go into collections because the cardholder was told they would receive benefits but never did. But I’ve only seen one person actually receive benefits from this insurance.

Still not convinced? Let’s take a look at the supposed benefits.

• They will make your payment if you are laid off or disabled. This is only for a certain amount of time, usually a year, and it’s only the minimum payment. The minimum payment on a balance of $8,000 is probably about $160. That is less than $2,000 in potential benefits. And your balance didn’t go down very much. At the end of the year you would still owe quite a bit. They didn’t really relieve you of anything.

• They will pay your entire balance if you die. Who cares? You’re dead. If there is another contractually liable person on the account then this benefit doesn’t kick in. If there was not another liable person then there isn’t anyone to collect the money from. No one needs to pay it.

Ok, so hopefully I’ve convinced you that you don’t need this service. When you get your credit card statement this month, take a close look. Make sure you aren’t paying for this service. Credit card debt is hard enough to get out of without having extra charges put on your account every month.

How to file a dispute with your credit card company.

If you make a charge on your credit card and there is a problem with the transaction you can file a dispute with the credit card company. You have 60 days from the posting date to file this dispute. There are several reasons under which you can file a credit card dispute. The most common ones are as follows:

• Services not rendered.
• Item not received.
• Service canceled.
• Item returned.
• Duplicate charge.
• Partial dispute. – you don’t have to dispute the whole charge if you had a problem with only part of your order.

Steps in filing a dispute.

• Call the merchant

This is the first step in disputing a charge on your credit card. It’s the fastest and easiest way to handle a dispute. It is entirely possible that if you contact the merchant and explain the situation they will remove the charge. Besides, the credit card company won’t go to bat for you unless you have spoken to the merchant first.

• Contact the credit card company.

Let them know you want to dispute the charge. They will probably ask you some very basic questions and send you a form to fill out.

• Fill out the form and mail it back.

The form will ask the details of the charge. They will want to know when you spoke to the merchant and the results of the conversation. If you have a cancellation number from the merchant you will need to provide it on this form.

• Wait.

It can take 30 days for a resolution to the dispute. If you see a credit on your account before the 30-day mark do not assume everything is finished. Most likely, it is a temporary credit issued while the company investigates the charge. If the credit card company find in your favor the credit is yours to keep, if not the charge will reappear on your account. So leave room for it in your available credit. (You shouldn’t be charging right up to your limit anyways.) If you don’t receive a temporary credit, don’t worry. The charge will not accrue interest or be included in your minimum payment calculation while it is in dispute.

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