Guide to credit card protection
As well as helping you to make ends meet or to pay for big purchases which you wouldn t otherwise be able to afford, your credit card protects you for anything you buy costing over 100. So, if the company that s sold you something goes bust before the item is delivered, or if it s broken and the supplier won t sort things out, you can still get a refund.
The best thing about this protection is that it s absolutely free and comes automatically with every credit card, so there are no additional charges and you don t have to pay steeper rates of interest to get it.
Why do credit cards offer this protection? It s all down to something call the Consumer Credit Act. Under Section 75 of this Act, credit cards must provide protection for purchase above 100 and below 30,000. The Consumer Credit Directive bumps up this protection from 30,000 to 60,260.
Importantly, debit cards do not offer this protection, which is one reason why it can be a good idea to pay for things with your credit card instead. Remember, however, that you must be able to pay back what you owe as soon as possible, otherwise interest charges could soon mount up.
Credit cards come with another free important protection perk which makes them more appealing than their debit card counterparts. Many of them offer purchase protection, which means when you buy something and it is stolen or lost within a set period of time, typically around 90 days, the credit card company will give you your money back.
As well as the protection outlined above, a few but by no means all credit cards also come with free identity theft cover, which will protect you against someone stealing your identity and running-up credit card debts in your name. This kind of cover typically provides a couple of free credit checks a year, so you can keep tabs on whether there have been any suspicious credit applications made using your personal details, as well as access to an ID fraud helpline.
Payment protection insurance
There s another form of protection that credit cards can provide, but only in return for an additional monthly payment. Payment protection insurance (PPI) is often sold alongside credit cards and loans and is intended to meet your repayments if you are unable to, for example, because you are ill, or because you ve been made redundant.
Unfortunately, many PPI policies were mis-sold in the past to people who wouldn t be eligible to claim for example, because they had pre-existing medical conditions, or were self-employed and so have received a great deal of negative press.
However, provided you understand exactly what you are signing up for, as well as the costs involved, this kind of cover can provide a lifeline if your income suddenly dries up because of illness or redundancy, and you don t have a partner who can cover bills while you can t.
If you are considering this sort of cover, always compare quotes from different providers, as premiums can vary widely, as can the terms and conditions. Pay particular attention to any policy exclusions that might prevent a successful claim.
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Written by CREDIT