It's your credit card company and it's imperative that they speak with you right now. Your heart stops, immediately fearful of identity theft or unauthorized charges.

Instead of a problem, the representative from your credit card company launches into a sales pitch for a credit protection plan. So what are they -and do you need them?

Credit protection plans come in all shapes and sizes, but they are basically a form of insurance packaged and promoted as a way for you to protect your credit score and your pocketbook if certain things take place.

While every credit protection plan is different, most are designed for credit card accounts and small un-collateralized consumer loans. These credit protection plans claim that they will step in and make your minimum monthly payment if certain calamities befall you.

For instance, if you get laid off from your job, go through divorce, or have a disabling accident, benefits will supposedly be triggered to help you in your time of need.

Sounds pretty good doesn't it? Here's the kicker: they rarely work out the way your credit card company claims they will.

Instead, here's what usually happens: you discover that the credit protection plan you've been so diligently making monthly payments on has more loopholes than a corporate income tax bill.

There are a few credit card protection plans that offer decent benefits and pay off the way they advertise, and that brings us to another reason I think they're a terrible idea.

As you know, being smart with your money involves carefully analyzing potential expenditures and making sound decisions based on available information.

These credit protection plans are pretty pricey; most will run you between $.79 — $.89 per month for every $100 of your balance. This is where they get you because most people think that if they pay off their credit card every month that they end up with a zero balance.

In the real world that would be true, but to your credit card company - it's not. If you use your credit card at any point during the month, you have a balance, because the credit protection plan fee is charged before any payments are credited to your account.

So if you were to use your credit card to buy a $5,000 plasma TV with the intention of paying the balance off in full when your statement comes, you would still be on the hook for the credit protection plan fee. At $.89 per $100 of your balance, that would come out to $44.50. On the surface, that doesn't seem like a whole lot of money, but remember you're planning on paying this card off when you get your statement.