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25.CCS
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1992-12-25
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CREDIT CARD "ENHANCEMENTS"
Many credit card issuers offer enhancements to their cards
such as price protection plans, extended warranties and
collision damage waiver coverage. In general, if these plans
carry an added fee, they are not worth it.
Price protection plans, for example, are available for about
a $20 annual fee. But, they do not cover car rentals, hotels
or charges for services. And they'll only refund the
difference up to $250. Also, some plans disallow items that
were not advertised in print, as well as close outs or
limited quantity sale items. Finally, be sure and keep your
sales receipt, you'll need it to file for a refund. Where's
the bargain here?
Extended warranty plans are no great deal. Most
manufacturers adequately cover their products against
defects. If they don't, stop the payment on the purchase.
Plus, in most cases, you'll have to prove that YOU didn't
cause the damage. How? Who knows. Steer clear of this
attempt to extract money from your wallet, it's just a
marketing gimmick.
Collision damage waiver insurance is another marketing ploy.
You're probably already covered on your personal automobile
insurance policy. A telephone call to your insurance agent
will tell you if you are. If you travel frequently, have it
added to your policy. If you only rent cars occasionally,
the modest insurance fee charged by the car rental agency
may be a more cost effective alternative for you. Remember
-- most credit card insurance plans are supplemental. This
means that they kick in after your other policies have been
used!
Credit card insurance plans are a form of personal insurance
offered by credit card companies. These "protection plans"
will pay your monthly minimum payment if you become
unemployed or disabled. Or, if you die, they will pay your
account balance in full.
These plans are not a good deal. The premiums are calculated
based on the account's outstanding monthly balance. An
analysis of one such plan revealed a monthly premium of
$5.60 per $1,000.
At first, this doesn't sound too bad. But, if you consider
the average yearly cost of a $100,000 term life policy is
$300 to $1,000, you'll see just how outrageous this monthly
premium is. Based on the $5.60 per month premium, a one
year, $100,000 term life insurance policy from this credit
card vendor would cost you $6,720.
Credit card companies prey on convenience. In doing so they
duplicate services that you already have available in some
other form. In short, they just disguise these services as
added conveniences and put a high price tag on them.
* * * End of CREDIT CARD "ENHANCEMENTS" * * *