Is credit card payment protection worth it if your job is in jeopardy?

credit cardIf you've had a credit card for more than three months you've likely been solicited to sign up for a payment protection plan. The benefits of these plans vary among card issuers, but in most cases, if you experience a qualifying event such as a job loss, the issuer will make your minimum payments and suspend any finance charges. I've always seen these plans as a rip-off but given the recent layoffs and down-sizings, I began to wonder if they make sense in certain situations.

Specifically, is it worth it to sign up for payment protection services if you know there is a strong likelihood that you will lose your job in the next few months? After looking into the protection programs from several of the most popular card issuers I came to a surprising conclusion: Based on the low cost of subscribing to these protection services on a short term basis, it is likely worth signing up if you believe your job will be gone somewhere between 30 and 90 days from now.

Watching Your Plastic

    This handout photo received on October 31,2008 courtesy of the Madera County Sheriff's Department shows the Steve Fossett crash site in Madera, California. US investigators in California looking into the disappearance of millionaire adventurer Steve Fossett have found bones and other personal items near to where his mangled plane was discovered, a report said on October 31, 2008. Bones, a pair of sports shoes, credit cards and Steve Fossett's Illinois state driver's license were found about half a mile (800 metres) from the spot where his plane was found at the beginning of October, the Los Angeles Times reported. The skeletal remains, which are believed to be human, were sent to a state crime laboratory for DNA testing, said Madera County Sheriff John Anderson. Officials hope to receive the results by early next week, the report said. Wildlife experts and police have speculated that wild animals may have devoured the aviator's remains. AFP PHOTO/MADERA COUNTY SHERIFF'S DEPARTMENT/HANDOUT/RESTRICTED TO EDITORIAL USE=GETTY OUT= (Photo credit should read HO/AFP/Getty Images)

    AFP/Getty Images

    This handout photo received on October 31,2008 courtesy of the Madera County Sheriff's Department shows the Steve Fossett crash site in Madera, California. US investigators in California looking into the disappearance of millionaire adventurer Steve Fossett have found bones and other personal items near to where his mangled plane was discovered, a report said on October 31, 2008. Bones, a pair of sports shoes, credit cards and Steve Fossett's Illinois state driver's license were found about half a mile (800 metres) from the spot where his plane was found at the beginning of October, the Los Angeles Times reported. The skeletal remains, which are believed to be human, were sent to a state crime laboratory for DNA testing, said Madera County Sheriff John Anderson. Officials hope to receive the results by early next week, the report said. Wildlife experts and police have speculated that wild animals may have devoured the aviator's remains. AFP PHOTO/MADERA COUNTY SHERIFF'S DEPARTMENT/HANDOUT RESTRICTED TO EDITORIAL USE =GETTY OUT= (Photo credit should read HO/AFP/Getty Images)

    AFP/Getty Images

    This handout photo received on October 31,2008 courtesy of the Madera County Sheriff's Department shows the Steve Fossett crash site in Madera, California. US investigators in California looking into the disappearance of millionaire adventurer Steve Fossett have found bones and other personal items near to where his mangled plane was discovered, a report said on October 31, 2008. Bones, a pair of sports shoes, credit cards and Steve Fossett's Illinois state driver's license were found about half a mile (800 metres) from the spot where his plane was found at the beginning of October, the Los Angeles Times reported. The skeletal remains, which are believed to be human, were sent to a state crime laboratory for DNA testing, said Madera County Sheriff John Anderson. Officials hope to receive the results by early next week, the report said. Wildlife experts and police have speculated that wild animals may have devoured the aviator's remains. AFP PHOTO/MADERA COUNTY SHERIFF'S DEPARTMENT/HANDOUT/RESTRICTED TO EDITORIAL USE=GETTY OUT= (Photo credit should read HO/AFP/Getty Images)

    AFP/Getty Images

    This handout photo received on October 31,2008 courtesy of the Madera County Sheriff's Department shows the Steve Fossett crash site in Madera, California. US investigators in California looking into the disappearance of millionaire adventurer Steve Fossett have found bones and other personal items near to where his mangled plane was discovered, a report said on October 31, 2008. Bones, a pair of sports shoes, credit cards and Steve Fossett's Illinois state driver's license were found about half a mile (800 metres) from the spot where his plane was found at the beginning of October, the Los Angeles Times reported. The skeletal remains, which are believed to be human, were sent to a state crime laboratory for DNA testing, said Madera County Sheriff John Anderson. Officials hope to receive the results by early next week, the report said. Wildlife experts and police have speculated that wild animals may have devoured the aviator's remains. AFP PHOTO/MADERA COUNTY SHERIFF'S DEPARTMENT/HANDOUT/RESTRICTED TO EDITORIAL USE=GETTY OUT= (Photo credit should read HO/AFP/Getty Images)

    AFP/Getty Images

    A Zimbabwean purchases tomatoes in Harare on September 21, 2008 with the Zimbabwe dollar equivalent to 2 US dollars. With prices rapidly rising, even more than once in one day, shopping is a mathematical proficiency test for Zimbabweans. To ensure their survival in an unpredictable, environment shops and service providers quote three different prices for the same item for shoppers buying in cash in the local currency, cash in foreign currency and those using credit cards. AFP PHOTO / Desmond Kwande (Photo credit should read DESMOND KWANDE/AFP/Getty Images)

    AFP/Getty Images

    A Zimbabwean purchases bread in Harare on September 21, 2008 with the Zimbabwe dollar equivalent to 2 US dollars. With prices rapidly rising, even more than once in one day, shopping is a mathematical proficiency test for Zimbabweans. To ensure their survival in an unpredictable, environment shops and service providers quote three different prices for the same item for shoppers buying in cash in the local currency, cash in foreign currency and those using credit cards. AFP PHOTO / Desmond Kwande (Photo credit should read DESMOND KWANDE/AFP/Getty Images)

    AFP/Getty Images

    This handout photo courtesy of the Boston Police Department shows suspect Clark Rockefeller. FBI agents on August 2, 2008 arrested a man accused of abducting his seven-year-old daughter, who was visiting from London, sparking a national manhunt and fevered speculation over the flamboyant fugitive's identity.The Federal Bureau of Investigation in Boston, where Clark Rockefeller allegedly abducted his daughter Reigh Storrow Boss from his ex-wife a week ago, said the fugitive was arrested in Baltimore, Maryland, and the girl freed. Rockefeller is now likely to face charges including kidnapping, assault, and possibly identity theft. However, police are no closer to resolving who the man they have in custody really is. He has reportedly used a number of aliases, including J.P. Clark Rockefeller, Clark Mill Rockefeller, as well as plain Michael Brown. Police at first thought he was about to flee to Bermuda or Peru on a yacht docked in Long Island, near New York. Some reports had him already in the Caribbean. AFP PHOTO/BOSTON POLICE DEPARTMENT/HANDOUT=RESTRICTED TO EDITORIAL USE =GETTY OUT= (Photo credit should read HO/AFP/Getty Images)

    AFP/Getty Images

    LA CANADA, CA - AUGUST 05: Customers shop at a TJ Maxx store on August 5, 2008 in La Canada, California. The Justice Department has charged 11 people with stealing more than 40 million credit and debit card numbers of customers shopping at TJX Companies, which owns the Marshall's and TJ Maxx chains, and other major retailers by hacking into their computers. The information was then allegedly sold to people who used it to steal tens of thousands of dollars at a time from accounts through automated teller machines in the US and Europe. It is one of the biggest identity-theft cases on record. Charges against the suspects, who are from the US, China, Ukraine, Belarus, and Estonia, include computer fraud, wire fraud, access-device fraud, aggravated identity theft and conspiracy. The suspects also accused of hacking into the computers of Barnes & Noble, Forever 21, Sports Authority, OfficeMax, Boston Market, DSW Inc., and BJ's Wholesale Club to steal information. (Photo by David McNew/Getty Images)

    Getty Images

    LA CANADA, CA - AUGUST 05: Customers shop at a TJ Maxx store on August 5, 2008 in La Canada, California. The Justice Department has charged 11 people with stealing more than 40 million credit and debit card numbers of customers shopping at TJX Companies, which owns the Marshall's and TJ Maxx chains, and other major retailers by hacking into their computers. The information was then allegedly sold to people who used it to steal tens of thousands of dollars at a time from accounts through automated teller machines in the US and Europe. It is one of the biggest identity-theft cases on record. Charges against the suspects, who are from the US, China, Ukraine, Belarus, and Estonia, include computer fraud, wire fraud, access-device fraud, aggravated identity theft and conspiracy. The suspects also accused of hacking into the computers of Barnes & Noble, Forever 21, Sports Authority, OfficeMax, Boston Market, DSW Inc., and BJ's Wholesale Club to steal information. (Photo by David McNew/Getty Images)

    Getty Images

    LA CANADA, CA - AUGUST 05: Customers shop at a TJ Maxx store on August 5, 2008 in La Canada, California. The Justice Department has charged 11 people with stealing more than 40 million credit and debit card numbers of customers shopping at TJX Companies, which owns the Marshall's and TJ Maxx chains, and other major retailers by hacking into their computers. The information was then allegedly sold to people who used it to steal tens of thousands of dollars at a time from accounts through automated teller machines in the US and Europe. It is one of the biggest identity-theft cases on record. Charges against the suspects, who are from the US, China, Ukraine, Belarus, and Estonia, include computer fraud, wire fraud, access-device fraud, aggravated identity theft and conspiracy. The suspects also accused of hacking into the computers of Barnes & Noble, Forever 21, Sports Authority, OfficeMax, Boston Market, DSW Inc., and BJ's Wholesale Club to steal information. (Photo by David McNew/Getty Images)

    Getty Images



The time frame is extremely important since most of these services do not provide any coverage during the first 30 days, which is why almost all of them give you the first month for free. After the first 30 days, you'll pay between 87 cents and a dollar for every $100 you spend or carry as a balance. This means that if you carry the average of $4,200 in credit card debt, a payment protection service will cost you $36 a month to enroll. Considering that $36 is likely less than your minimum payment with a $4,000 balance, a payment protection plan seems to be a prudent choice.

While I in no way advocate spending close to $500 a year on payment protection services if you have cash on hand or little fear of losing your job; payment protection offers consumers a cheap lifeline if they are up for gaming the credit card companies. Before you sign up for a service like this make sure you read all of the fine print, including any restrictions on claiming benefits. Finally, don't forget to cancel the service if you make it past the layoffs at your company.

Let me reiterate; there is no compelling reason to purchase a payment protection plan for an extended period of time. If you have the time and the ability, you are better off working to pay down your debt and establish an emergency fund with the cost of enrolling in a payment protection plan.

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