Most of us get phone solicitations from companies trying to sell a product which, even though they won’t call it by its’ real name, is credit card insurance, a product which can help save your credit in troubled economic times. In these financially challenged times, everyone is looking for more ways to save money. Studies have shown that more and more of us are car pooling, brown-bagging our lunch to work, cutting coupons, shopping at second-hand clothing stores . . . almost anything to help stop the financial bleeding.

One of the ways in which you may cut costs might be found in your wallet right now. Do you carry credit card insurance on your card or cards? Did you read the fine print before you made the purchase? Some people may be paying for this insurance on their cards (especially those who enrolled online or over the phone), without even knowing it. Depending on how many cards you have, or what your balance is, those fees can add up over the year!

Credit card insurance pays the minimum monthly payment on your credit card if you are out of work due to a disability or illness, and also will pay off the balance in the event of your death. But, what a lot of people fail to take notice of are those three important words: minimum monthly payment! Most credit card insurance companies only pay the monthly minimum amount due on your balance, if you happen to be out of work due to illness or injury and cannot make your payments. In the meantime, however, interest charges still accrue on your balance. In essence, due to the interest charges still being applied, your balance will not go down much. . . you are basically just “maintaining" the account, like it’s on hold until you are actively back at work. And, most people find that the cost of the insurance – from .50 ¢ up per $100 of loan coverage – resulting in fees of $20-$35 on average per month, is not worth the benefit received.

Putting it into perspective, credit card insurance is basically equivalent to a late fee and you still have to pay the interest and principal. So what is the benefit? The only real benefit is that you don’t get slammed with a bad credit rating for not paying your bill if you are unable to work. That being said, the balance will keep growing until either a) you pay it or b) the account reaches its’ limit. At that time you will be forced to deal with it.

Who buys credit insurance? Typically, people on limited incomes will opt to buy this insurance coverage. They tend to have higher balances (as some use credit cards as a regular way of monthly spending), and have little to no discretionary income with which to pay their minimum amount due on their credit card should they become ill or injured. For this market segment, credit card insurance may make sense.

For those with a middle-to-higher income base, however, it’s probably wiser to pay down the debt and set aside funds for emergencies such as losing your job or becoming disabled. Paying down debt is a lot easier said than done, I know. Try to be creative! Have a garage or yard sale or get a part-time job to help supplement your income until the credit card debt is reduced.

So, take a few minutes to dig out all your credit card files. Find out on which cards, if any, you are paying for credit card insurance – and then make an informed decision as to whether it is really necessary to continue the coverage. By law, you can cancel the coverage at any time, so don’t think you are contractually bound to keep it in force. Take action today!