Credit Series: Credit Card Insurance: Do You Need It?
Dr. Jo Turner, Professor, Family and Consumer Economics
Do you own a credit card? Most Americans do. You might even feel a need to protect yourself and your credit cards against credit card crimes.
You may be contacted by an agency offering credit card protection insurance. You may already have been contacted by one of these firms. Before you sign up for credit card protection, know what you are buying.
Credit card protection firms -- for a fee ranging from $15 to $50 per year -- generally offer to keep a record of the cardholder's credit card account numbers, report lost or stolen cards, arrange for replacements, and notify card issuers of the customer's address change. Some services also provide stranded travelers with emergency cash advances and airplane tickets.
Many people think they need a protection service for insurance against having to pay for purchases charged to their account if their card is lost or stolen.
These services may sound inviting, until you realize what your rights are as a holder of a credit card.
Your credit card losses are limited by law to $50 per card if you immediately report the card lost or stolen. Some card issuers will not press the victim for this $50 per card loss if the victim is willing to file charges against the thief, if caught.
By paying for credit card protection, you're unlikely to receive services that you do not already have by owing a credit card, or services that you cannot easily provide yourself -- with no middleman cost. You may be doing yourself a disservice by buying credit card protection, because of the likely time-delays in agency reporting.
Protect yourself from unauthorized charges against your credit cards by keeping a record of each credit card number. It is as simple as a telephone call and a follow-up letter to report a lost or stolen card. It may be more important that you do the reporting yourself to eliminate the risk of being held liable for unmade purchases. A protection agency may not make a report to the issuer for several days to a week after you report it to them.
As for the other services offered by an agency, you already receive a form to be completed for an address change along with your charge card bill each month. And many credit cards provide emergency cash advances.
So think carefully before you decide you really need additional credit insurance. For more information on credit contact your local county Extension office.
