Wednesday, 24 January 2018

Beware the Sting of the Credit Card Insurance

Okay, as expected, after paying off my low interest rate credit card, there was a bit of a bounce. 

A “bounce” with regards to a credit card is the phenomenon of after paying off the credit card in full, yet a few days later a small balance appears on it.

This is due to the fact that at the end of your credit cycle the credit card people will do an assessment of the interest charges that were due from the last time it was calculated until now.

In my case it was twofold: 

1. Interest Charge: $9.04
2. Balance Protection Insurance: $30.19

Yep, you read that right the amount charged for “Balance Protection Insurance” was three times more than the interest itself. 

Just to be clear that “insurance” will pay my minimum payment for me if I forget or just can’t pay it. 

It is one of those things I signed up for long ago, or just was added to this card, I am not sure which. 

Here is how it goes; a certain percentage of the outstanding balance of the credit card is charged to my card as that “Balance Protection Insurance” fee.

This will rack up that balance much faster than any interest payments ever could. I will be cancelling that insurance today, as I have no use for it; I declare myself, self-insured.

It is little tricks like these that prey on the poor and those fearful of their fiscal situation which makes credit cards such a trap. 

When you are worried about your cash-flow and whether or not you can pay all of your bills, that “Balance Protection Insurance” sounds great. 

Considering what it costs you, it is quite the racket. Something to think about.

As always: Keep your head up, your attitude positive and keep moving forward!

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