Credit Card eZine - News and Articles about Credit Cards

Credit Card Deals and Disability Insurance

2007-09-28

No one is protected from financial setback. You may become insolvent as a result of illness or a loss of job and then you face really hard times paying off utility bills or settling accounts with your creditors. But, according to the promises of banks, credit card companies and other financial institutions, it shouldn't be this way.

Almost all customers looking for credit card deals are offered disability protection plans in exchange for a fixed monthly fee. In case you become disabled the plan is supposed to pay your bills. However, when you really need the plan to protect you, it fails.

We have a sad story from a credit consumer who wrote in complaining of the disloyalty of his creditor. Martin thought he was lucky to get a Discover credit card as, apart from low APRs and no annual fees, it offered good disability coverage.

Normally carrying no substantial balances and never exceeding the credit limit, Martin was sure his creditor would give him a backing when needed. After missing a couple of monthly credit card bills, he ventured applying for credit card disability insurance but it not only appeared to be a drag but also the right path to a greater credit card debt.

Why? First of all, it is a long process of paper work. Mind it that while you are trying to activate the disability insurance your credit card bills are piling up and the debt is increasing. So, what are the documentation requirements?

Martin was required to provide the date he became disabled and specialties on all the doctors who examined him and can prove his disability status. Then, he was asked to describe his disability in detail which he found rather humiliating.

The rest of the questions concerned his personal and credit card information and it also took the man quite a time to complete. It's easy to imagine his frustration when he saw the credit company searching reasons to decline his application...

And it's no wonder. Money lenders are profiteering by nature and they will fight for their share till the end. Having lost precious time and coming up with no result, Martin filed a claim against his disability plan providers but even with legal help he had to be content with only freezing credit car bills.

Yes, that's how the plan works at its best. The banks entice you by special debt suspensions offers without involving insurance companies. The service is not free, however, and though it goes as an extra with your plastic, you are set to pay fixed monthly fee.

But once you become insolvent because of disability or a lost job, the credit company will not pay the bills for you. At best you will be exempt from interest rates and allowed to stop paying on your credit card. But the bills will not disappear. They are being piled, waiting for you to recover.

So, you are still responsible for the debt, even though you've been paying for the disability coverage. And while you do not pay under the plan, the debt is increasing and you may end up with a much worse credit rating than before.

Such instances are frequent but not omnipresent. Wise credit consumers try to protect themselves beforehand. Thus, choosing a credit company, they make sure this is the right one, that is, it comes directly from the credit card issuer.

If you do not check everything properly, you may fall victim to shady companies which promises are inconsistent and products - a mere scam.

Disability protection plans are just one more trick of credit issuers. When you apply for a credit card banks assure you that they will care of your needs whatever happens, but when you are disable to pay a bill they just dump you. Is there any justice?