Do you have PPI on your credit card? : Credit Card Guide

Do you have PPI on your credit card?

Many of us have one or more credit cards these days, and these cards can prove invaluable in terms of offering ease, convenience, increased security, and flexibility.

However, like any other form of finance a credit card is a financial commitment and it is important to keep up with repayments in order to avoid damaging your credit or facing court action and creditor hassle. It is impossible to predict what life has in store, and something such as an unexpected accident, injury, or redundancy can come like a bolt from the blue, leaving us wondering how we will repay our debts.

This is why many people decide to take out protective insurance when they take out any form of finance, and credit cards are no exception. When you take out a credit card you can opt to take the insurance that is offered with the card. This insurance is designed to cover your repayments for a specified period of time in the event that you are not able to keep up with repayments due to sickness, accident, or redundancy. This can offer peace of mind and increased financial stability to the cardholder.

The cost of payment protection cover on credit cards is not extortionate, but the amount that you will pay does depend on your outstanding balance on the card. Most credit card providers charge around 80 pence per £100 outstanding on the balance, so those with a low balance on their credit cards may not really notice the charges. However, if, for example, you have £2000 outstanding on your credit card and you only tend to make minimum repayments, which means that the balance never really goes down by much, then you will notice the difference because you will be hit with a £16 charge each month.

PPI has been at the centre of controversy recently because campaigners and regulators claim that many people are wasting their money on PPI plans that can never benefit them. Although PPI can provide peace of mind it is important that you ensure that you can actually benefit from it before you sign up to it. If, for instance, you are self employed you cannot claim for redundancy and therefore are paying for a benefit that does not even apply to you. It is therefore vital that you read up on what the PPI covers before you commit.

Another thing to bear in mind is that this credit card payment protection cover is optional, but many people feel either bullied into taking it out or do not even realise that they have taken it. You should check your monthly statements to make sure that you know whether or not you are paying PPI, and if you do not want the cover make sure that you write to the credit card company and get it removed.

You should also bear in mind that, like any other finance company, credit card companies do not like paying out on this type of cover, and according to the Office of Fair Trading only one in five PPI claims is successful. You therefore need to weigh up the pros and cons to determine whether, based on your needs, circumstances, and credit card balance, PPI is something that you want or need.

Tom Smith
5th December 2007

More information:

The Pros And Cons Of Payment Protection Insurance
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Credit Card Charges
Credit cards appear to have only one cost to a user – the interest charged on purchases, but there are a whole raft of hidden charges just lurking below the surface. So, some cards offer an annual payment option in return for certain benefits. What is the best option, and in what circumstance

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