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[P147]Payment Protection Credit Card

by Simon Burgess, Sim

Payment protection insurance (PPI) is one of a family of protection policies that can be taken out to give you an income if you were to be out of work. In this case the policy would make sure that you had the money needed so that you can carry on meeting your loan or credit card repayments each month.

Payment protection would begin to provide you with the money so that you wouldn't get behind on your loan or credit card repayments and so not get into debt. For a premium each month which is based on the amount you want to cover and your age at the time of taking out the policy, once you had been out of work for a period of time which can be anything between the 31st and 90th day you would then be entitled to receive a tax free income each month for up to 12 months and in some cases for up to 24 months.

A payment protection policy is also known as ASU insurance; this is because the cover pays out if you should be out of work after suffering from an accident, sickness or through unemployment by such as redundancy. However, as with all insurance cover, there are exclusions in all policies which could mean that you aren't eligible to make a claim and so a policy wouldn't be in your best interests. These include if you are only in part time work, if you suffer an ongoing illness, are of retirement age of if you are self-employed. The exclusions can vary from provider to provider so it is essential that you do read the key facts and small print of a policy before signing for the cover.

Payment protection can be taken out alongside the loan or credit card from the high street lender but this is the dearest way of purchasing the cover and it can add hundreds onto the cost of the loan. A far better way to purchase payment protection is to buy it independently from a standalone specialist in payment protection, a specialist will always offer the cheapest premiums for the cover and as they are more ethical than the high street lender they will make sure that you have access to the information needed so you can make sure that a policy is suitable for your needs before you purchase it.

Mis-selling of payment protection was high lighted in 2005 when a super complaint was made to the Office of Fair Trading by the Citizens Advice, following this an investigation into the sector began which showed that mis-selling was wide spread and resulted in several major high street names receiving fines. The mis-selling stemmed from a failure on the providers part to give the information needed for consumers to make an informed decision.

If you want payment protection to work then you have to understand the ins and outs of a policy. In March 2008 the Financial Services Authority are going to introduce payment protection insurance comparison tables, the table will ask a series of questions which then lead to the consumer being able to make an educated decision.

Britain's biggest credit card company is behind a new idea to give the holders of its credit card the option to stop making repayments if their income is drastically cut. In practice, it's a form of payment protection insurance (PPI) which lenders have been barred from selling alongside forms of credit but the bank claims that its debt suspension option is not an insurance policy.

When you take out the card you are given the opportunity to pay a separate fee equivalent to 0.89 per cent of your average daily balance in any month. Therefore, if your average daily balance was 500 pounds, your fee for that month would be 4 pounds 45 pence.

This fee entitles you to take advantage of a debt suspension period, subject to certain conditions. If your net income suddenly falls by more than twenty five per cent - for example because you've become unemployed, or are on maternity leave - then the credit card will allow you to stop payments for up to two-and-a-half years and no interest will be added. But at the same time you won't be allowed to use the card.

To us this looks like a poor-value variation on Payment Protection Insurance and it's quite confusing. It doesn't repay your debt it simply suspends it and your income has to drop by 25 per cent, which is a lot especially if you are also receiving redundancy payments or statutory sick pay.

We believe that people would be better off buying an income protection policy which pays out each month if you are made redundant or are off work due to sickness or an accident. You can then use the monthly payouts to continue paying your monthly credit card repayments and reducing you debt. And should you want to, you'd still be able to use your card.

The cost of a stand alone PPI policy is about 5 per cent of the monthly payment you want to receive and you can cancel the insurance at any time without penalty. This policy then gives you the freedom to choose what you do with the payout and the payouts are tax free.

Following an agreement between the credit card industry and the Government, credit card providers must provide a breathing space of at least two months for card holders in financial difficulty. During this period, the interest is not added to the debt and the interest rate must not be increased. In order to qualify for this breathing space, cardholders in difficulty have to consult a free debt counselling service.

Whilst credit card companies and indeed loan companies, can't sell payment protection insurance at the same time as a client takes out a card or loan, they can do so after a waiting period of seven days after you had taken out credit. That is according to the regulations introduced by the Competition Commission. This waiting period gives clients time to consider whether you need it and then shop around for it. In our experience you can buy PPI cover online for a faction of what a lender would like to charge you!

Article Source : Advantages And Disadvantages Of Using Credit Cards

About Author

Both Simon Burgess & Michael Challiner are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Simon Burgess has sinced written about articles on various topics from Mortgage Insurance, Finances and Income Protection Insurance. Simon Burgess is Managing Director of the award-winning British Insurance, a specialist provider of insurance, loan protection insurance and inco. Simon Burgess's top article generates over 74000 views. to your Favourites.

Michael Challiner has sinced written about articles on various topics from Finances, Advertising Guide and Quit Smoking. You're Credit Card company are demanding you're overdue payments and you didn't take out Payment Protection Insurance. You're in a mess. Well its time you took a trip to the Dont Break The Bank website. Here we offer all our UK residents information on. Michael Challiner's top article generates over 165000 views. to your Favourites.