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Question:
APR 24, 2012

Payment Protection Plan

I have the Chase Payment Protector Plan on my credit card. I became unemployed recently. Should I use the plan or cancel it?

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Bill's Answer: Bills.com Resident Expert

The terms vary, but most payment protection plans pay either a portion or all of the outstanding account balance or monthly payment amount for a loan, line of credit, or credit card in the event of death, disability, job loss, or some other specified covered event. Think of a payment protection plan as a form of insurance -- if you are lucky you never need it then buying the insurance was a bad gamble. However, if you need the insurance then buying the policy was a smart bet.

In general, payment protection plans are expensive for the value offered. Consequently I recommend consumers analyze and understand the complete cost of a payment protection plan before buying one. In most cases it would be smarter to spend the money on paying down the balance sooner or taking the money that would have gone into the payment protection plan and depositing it into a savings account.

Chase calls its program "The Chase Payment Protector Plan." The Chase plan makes minimum monthly payments and waives interest for six months to two years if a consumer becomes unemployed, disabled, or is called into active military service, among other conditions.

Recommendation

You mentioned you have been paying for a payment protection plan on a Chase credit card and are unemployed. You are concerned that if you start using the plan your other creditors will detect this and cause you some harm. I am guessing you fear the other creditors will increase your interest rates or decrease your available credit limit. You also wrote, "So far, I'm able to make the minimum payments," which suggests to me you fear you will be unable to make the minimum payments in the future.

At this point, you are making minimum payments and are getting charged interest on your $8,500 balance. By invoking the payment protection plan the payments will continue at the same minimum level you are paying now, but interest charges will be suspended.

Should you start using the payment protection plan? That is up to you to decide. I have no insights into your savings and overall cash burn rate, your other credit cards and their balances, your profession, and prospects for a job. If you are a wealthy individual, have a low cash burn rate, and excellent career prospects, then invoking the Chase payment protection plan is a bad idea. However, if you are not wealthy, are burning cash at a frightening rate, and face a tough job market I think your choice is very clear.

I hope this information helps you Find. Learn & Save.

Best,

Bill

Bills.com

Comments (16)


Josephine N.
C/o Bayonne, NJ  |  April 24, 2012
I have credit card protection on all of my cards except American Express. Recently I attempted to enroll in the Amex Account Protection Program 1-800-293-8154 and I was told that they are no longer taking any applications. When I queried the representative as to why she said she had no idea. This makes no sense to me. Are there any independent credit card insurance policies out there that I can use to enroll my Amex card?
Bills.com
April 24, 2012
None that I know of, and if there were any I would not recommend them. If you run the numbers, the fees one pays for credit card insurance would be better spent paying down the principal.
Laurel A.
Madisonville, KY  |  September 21, 2011
My husband has about 13 credit cards (personal and business in his name only). He has paid for payment protection on many of them. He recently became disabled and receives SSD. If he uses his PPP on the cards that have it, will his other card companies cancel him or reduce his credit?
Bills.com
September 21, 2011
There is nothing I found in the Credit CARD Act of 2009, or elsewhere in the Truth in Lending Act, that prevents credit card issuers to do what you described in your message.

The question of whether other credit card issuers will cancel or slash his credit limit is unknown to me. Readers, if you have any experience with other credit card issuers taking an action if you use a payment protection plan, could you share it below?
Crislo D.
July 20, 2011
I called the credit one credit protection program today that been paying for 5 yrs but they denied me due to voluntary unemployment because my husband is in USARMY we are stationed here in pacific it breaks my heart i think fighting for freedom is no meaning at all..:(
Jenn M.
Brooklyn, NY  |  March 02, 2011
hi - does activating a payment protection plan cause an adverse effect on a credit rating? i see you mentioning that enrolling with a CCCS can but that's not the same thing as using this, correct?
Bills.com
March 02, 2011
Activating a payment protection plan does not harm your credit rating. You have to make your minimum monthly payments to your creditors, to preserve your credit rating and avoid derogatory information appearing on your credit report. Find out how much of each bill your plan covers, making sure to meet the required minimums, if the payment protection plan contribution does not meet the requirements on its own.
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Allan L.
Altoona, PA  |  April 23, 2011
I'm on Social Security Disability..I too had the Payment Proter Plan. I have a Home Equity Loan..Chase denied and denied , using all kinds of made up stuff...Finally after 3 ,1/2 yrs they relented and offered pennies on the dollar amount that they owed me...There is now a Class action against them , but only the Lawyers are going to get any REAL money...Claiments so far are offered "up to $60" ...What a bunch of B.S. JPMORGAN/CHASE BANK biggest profit of top 5 US Banks this year ! No wonder! They don't pay out claims...
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Laurie P.
Lisbon, CT  |  May 18, 2011
I have been paying 28.00 a month for there Protection insurance on my HELCO CHase Loan for 3 yrs now. and I am very concerned on what I am reading.. If I was to get hurt or unemployed are you telling me THEY WILL NOT Pay my monthly payments?? And can you tell me what claim you put in for and what reasons did they deny you??? Need all the info you can give me .. before I call them up!! I need amo.. Thank YOU Really..
Nl .
October 26, 2010
I have been paying for payment protection and am now unemployed. How do I activate my benefits?
Bills.com
October 26, 2010
Call your credit card issuer. A toll-free number should be printed on your monthly statement. Call the customer service center and explain that you want to start to use the benefit. Take notes of the conversation you have with the customer service representative in case you need to refer to this conversation later.
Fast P.
October 07, 2010
Credit card payment protection plans relive you when you are out of work or sick. Your entire balance can be waived in one the emergencies. The cost is usually a percentage of your monthly balance, on the order of 1 to 2 percent.
Instant P.
August 05, 2010
You should avoid this service as you will have to pay the company $0.50 for every $100 in balance. Their protection plan is nothing other than a crap.
Ken .
June 28, 2010
Chase and other credit card companies that offer PPPs are taking advantage of consumers like you. I am a class action consumer protection attorney. Please email me and together we can stop the credit card company's predatory practices. Ken.
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Mary S.
Slidell, LA  |  December 10, 2010
My Mother borrowed $7500.00 in 2005. She is on a fixed income (retirement and pension) and the interest charges on this bill is outrageous. As of todays date (12-10-2010) she still has a balance of $7341.43+. Is there anyway you can help her get the interest charges reduced so the monthly payment would be affordable. The bank has put fear into her telling her that a consumer counseling program would reflect her credit as bad. She is willing to pay this if she could see some progress in finishing this balance and the monthly payments are made affordable. She is just trying to make progress in paying off this bill. Thank you for your help.
Bills.com
San Mateo, CA  |  December 10, 2010
I advise your Mom to speak with a Consumer Credit Counseling Service (CCCS). She should find out what interest rate the CCCS can obtain for her on the account in question and compare the CCCS rate to her current rate. If the rate can be lowered through a CCCS program, then your Mom can decide if it is more important to pay off the debt faster or to focus on the impact on her credit rating. It makes a lot of sense to enroll in a CCCS, if she is unlikely to apply for credit or a loan while in the CCCS program.
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