Don’t Let Fear Sucker You Into Payment Protection


Let’s get something out in the open – financial institutions love to use fear in order to sucker people into signing up for products or service that you really don’t need. If you have a credit card, you’ve probably heard the pitch. It usually comes from a telemarketer, who tries to use fear by giving you a future scenario of hardship such as job loss in hopes of getting you to sign up for payment protection insurance.

By purchasing credit protection insurance that will handle your credit card debt if you lose your job, become disabled or die – is the promise that you get in the pitch. Sounds attractive at first, but is it really true? It’s actually anything but true and instead the payment protection insurance policies are laced with heavy duty jargon that even the best lawyers will have trouble understanding.

The best example I can give you is that payment protection insurance sounds very similar to the extended warranty on purchases such as used cars, appliances and electronics that sales people try to rope you into. If the insurance protection was that good, everyone would be signing up for it, and their cars, TVs and appliances would have infinite life spans. At the end of the day, sales people try to sell additional products and services based off of fear but running the numbers will allow you to see that these up sells are not worth it in the long run.

What are Payment Protection Plans?

Payment protection plans have hit the spotlight ever since the harsh economic times of 2008. Financial institutions are heavily pushing credit insurance onto people with various tactics that all pertain to fear. With a tough economy and job market and even the best of health could change at any time, it’s no wonder that different credit insurance protection plans like this are counting on fear and offer what seems like an easy solution in case we should become unemployed or disabled.

For only a few bucks a month, you can get the peace of mind you deserve in case of tough financial hardship due to health, job loss and other unforeseen circumstances. Unless you’re packing a dictionary, and have hours to invest into reading one of these credit protection contracts (and most of the time they won’t even show you one), credit protection insurance is rarely worth it, and doesn’t apply to 90% of credit users.

True Reason Why Payment Protection Isn’t For You

There are way too many exceptions.

If you ever tried reading one of these payment protection agreement’s (and I have), and only made it through two pages of a total of seven, one message is very clear – there are way too many exceptions. And too many exceptions usually means that there’s a less chance that it will apply to you and your scenario.

It turns out that most people who try to receive the benefits through payment protection never do because of the amount of exceptions the finance companies list. Exceptions  such as involuntary unemployment and length of unemployment are two exceptions that disqualify most applicants right out of the hop.

How Can You Get Payment Protection Without the BS?

Save Money

The best way you can give your self credit protection is by saving your money so you don’t need to rely on credit. And when combined with the delay of instant gratification, your need for credit will become a thing of past.

Build an Emergency Fund

Rather than investing in the payment protection with a few dollars per month, you can take those same dollars and tuck them away into an emergency fund. A few dollars here and there could lead to a solid emergency fund, and in turn you can create your own GUARANTEED payment protection plan.

Final Thoughts

Payment protection insurance is likely not for you, and the people who get it are the ones who can’t afford it the most. This comes back to the whole installment of fear through the sales pitch. If you’ve been mis-sold payment protection insurance, you’re likely not alone, but you do have options – simply make a ppi claim and they’ll work side-by-side with you to get your hard earned dollars back. At the end of it all, to sum up payment protection insurance it’s one of those products with a high cost upfront and minimal return in the end. Furthermore, most plans cover only your minimum payment, yet your monthly payment protection insurance likely won’t be higher than your minimum payment.

So, next time someone pitches payment protection insurance, simply say NO!

Readers, have you ever been pitched to purchase payment protection insurance? Did it sound enticing? What made you walk away or sign up?




  1. That does sound an awful lot like an extended warranty, which I will never ever ever buy again. Those places tell you they cover everything, then get out of paying for anything! Such a scam. Thanks for shedding some light on these less-often-heard-about payment protection plans.
    Michelle recently posted..Coming Up RosesMy Profile

    • Hi Michelle!
      Thankfully I never ever purchased extended warranty simply because the logic of it never made sense when I though about it in the moment. What amazes me is why governments don’t put a stop on such scams. Thoughts?

  2. Yea, I’ve fallen prey to this money waster. NO MORE. Rarely does a warranty pay off for the purchaser!
    Barbara Friedberg recently posted..The Positive and Negative Impacts of Globalization; Financial and Other ImplicationsMy Profile

  3. The boyfriend did. And I swear to God all that did was make fraud turn up on his account more often. There’s actually a class-action lawsuit against the credit card company right now. Huge mess. Never again.
    femmefrugality recently posted..Voter ID Law in PennsylvaniaMy Profile

  4. I can’t say I have ever purchased a credit protection plan, because like most people, I assume I will never have an illness or injury that causes me to be out of work. While that assumption is really dumb, I still don’t think the protection plan is a good idea. I will never carry a balance on a card again, so it is a moot point.
    Kim@Eyesonthedollar recently posted..Happy Labor Day, Useless Fact EditionMy Profile

  5. Ooh..I’ve fallen for extended warranty.sigh. But never credit card protection. I don’t carry a balance!
    Cat recently posted..Living paycheck to paycheck – how does it happen and what are the consequences?My Profile

    • You’re rocking. Good for you – not carrying a credit card balance shows someone in control of their finances.
      I on the other hand carry a minimal credit card balance for different reasons, but have never fallen for either or.

  6. Been there, done that, however what if you get the insurance for (almost) free?

    I took a plan after I got my laptop a couple of years ago, I got the protection plan for it for just a few dollars.

    Glad I did. My HP just fried last night and it’s being worked on as I type this response. Luckily, my wife doesn’t run a blog and I can use her machine :)

    Overall, totally agree man.
    My Own Advisor recently posted..August 2012 Dividend Income UpdateMy Profile

  7. We haven’t gotten extended warranties or payment protections on anything to be honest. I just think they are a waste of money and when you need them the most well they are expired. We picked up our 55 inch smart tv last year and even the bloke behind the counter said he would on an laptop but not on a tv. You also pay a small fortune for some of them. Can you believe I have credit card companies calling me to sell me payment protection. I’m like, mate, I have no debt with this card, never have and never will so tell me please how you want to help me again…
    Lots of great points mate.

  8. I remember many years ago a friend of mine worked at a big well known electronics store and he used his store discount to buy me a television set.

    I think I ended up getting an 8% discount on the television set.

    He told me to get the extended warranty package, it was $29.99 but AFTER his discount it was only $6, just goes to show you the kind of money they are making off this sort of thing !!!
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