Is credit card protection worth the cost?
However, your credit score does stay intact, and the bank stops interest accrual and late fees by essentially "freezing" your account. That's not a bad thing, unless you actually need to use credit to get through the tough times.
What if you have more than one card? "You'd have to pay multiple plan fees and juggle them to protect all of your cards," McHenry says.
As with any credit card offer, read the fine print. That's often difficult to do in advance with these plans because the bank usually doesn't send the contract until after you are enrolled, although many let you call in to cancel at any time.
Those who are over their account's limit and with a history of late payments aren't eligible for coverage. If you're close to your card's limit, the monthly payment protection fee applied to your balance could put you over.
Protection plan fees from major issuers
- The American Express Account Protector plan charges 85 cents for every $100 on the monthly-balance statement. It pays up to $500 of a cardholder's minimum monthly payment for up to 24 months, depending on the life event, and it lets you continue to use the card while it's making payments on your behalf.
- Discover's Payment Protection rate is 89 cents per $100 and suspends payments, finance charges and late fees for up to 24 months as well as payments for "celebration" events like marriage and relocation for one month. Discover allows you to charge up to $1,500 while the plan is activated, with waivers on interest and minimum payment. If you make a payment toward that $1,500, your credit line remains open for use.
- Bank of America charges 95 cents per $100 for its Credit Protection Plus and cancels up to 18 months of monthly payments for involuntary unemployment, disability or hospitalization. It cancels up to three months of payments for marriage or divorce, relocation, child birth or adoption, and entering or graduating from college. However, finance charges will continue to accrue on the balance.
- JPMorgan Chase & Co.'s Payment Protector is 89 cents per $100, but it does offer an alternate plan for 59 cents to retirees, those who are self-employed and others with special circumstances. You can still use your card up to the credit limit if you've activated the benefit, and minimum interest, late fees and accrued interest aren't applied during the time. The benefit time frame for job loss can last up to 24 months. There's also an annual "payment holiday," letting you suspend one payment per year for a household, medical, education or transportation expense of up to $50.
- Wells Fargo's Credit Defense defers payments for up to 12 months for job loss, and up to three months for a temporary leave of absence. Credit Defense Platinum pays the card's minimum payment for up to six months. Both plans charge 89 cents per $100. You can keep using the card when benefits are approved, but any additional charges incurred are your responsibility.
You're also not eligible if you're already unemployed. Many companies want you to be employed for 30 to 90 days before enrolling, and Wells Fargo demands at least four months. Forget about enrolling if you left your job voluntarily.
Only full-time employees need apply. The majority of credit card companies don't cover part-timers working less than 30 hours a week, seasonal workers or self-employed.
If you activate payment protection after being laid off, you'll need to show proof that you're receiving state unemployment benefits. Some issuers have waiting periods, stating you must be unemployed for at least 30 days before they'll activate the plan.