What Is Credit Card Payment Protection?

Introduction

Having a credit card is one thing. But what if you face an emergency and can’t make your payments? Well, that’s where credit card payment protection comes in.

What Is Credit Card Payment Protection?

Credit card payment protection is typically an optional paid program, or “add-on product,” often in the form of a debt cancellation contract or debt suspension agreement. This provides additional protection for your credit card account if certain things go wrong. If you have this protection and a qualifying emergency comes up, a few things could happen.

• You might be able to pause your credit card payments for a set time frame.

• Your card issuer might temporarily make your minimum payments for you.

• Your account may be eligible for a balance payoff.

This can keep your account in good standing instead of falling into delinquency when a qualifying hardship occurs.

How Does Credit Card Payment Protection Work?

Terms will vary depending on your credit card issuer, but credit card payment protection usually starts with enrolling in the program and paying a monthly fee. The amount you pay might be a flat fee, but it’s often based on your balance ­— so a higher outstanding balance means a higher fee.

And that monthly fee usually applies to coverage for the next billing cycle. As an example, the fee could be $1 per $100 of your outstanding balance, or part thereof. So if you had a $475 balance, the fee that month would be $5.

If you experience certain hardships — like involuntary unemployment or disability — you may be eligible to activate the program benefits, which would then allow you to stop making payments for a period of time. Credit card payment protection might also cancel a balance owed if a cardmember dies.

It sounds simple, but you’ll want to verify some details before jumping in and starting to pay for the program. Each creditor has specific eligibility requirements, conditions, and exclusions that determine whether you qualify for protection.

 Those eligibility requirements might include:

• Being enrolled in the program for a minimum number of days before the loss of employment or disability occurs

• Being under the care of a licensed doctor who will verify your disability

• Providing documents to verify eligibility

You should be able to see the full list of requirements and other details of your credit issuer’s program on their website or in your card or program terms and conditions.

Is Credit Card Payment Protection Worth the Cost?

For some people, credit card payment protection could very much be worth the cost. But you’ll need to weigh the potential pros and cons to decide if it’s right for you.

Pros

Payment protection comes with a few benefits.

• Having peace of mind

There’s one less thing to worry about in the face of a crisis if you can temporarily pause your credit card payments.

• Protecting your credit score

Putting your payment obligation on hold means your credit score may not  suffer from late or missed payments — at least for the period your protection is in effect.

Cons

Of course, you’ll also find some drawbacks to credit card payment protection.

• Paying more fees

The monthly fee can add up over time — and the more you use your card each month, the higher your fee may be.

• Navigating conditions and exclusions

Protection programs typically come with eligibility requirements, conditions, and exclusions, so reading and understanding the fine print is the only way to know exactly what you’re getting.

How To Decide if Credit Card Payment Protection is Right for You

After you’ve weighed the pros and cons, you’ll still want to consider a few other factors before deciding if payment protection is right for you.

• Your finances

How is your financial situation? Do you have savings or an emergency fund? If your finances are strong enough to withstand the costs of an emergency, perhaps you don’t need the coverage.

• Your health, lifestyle, and job security

How is your physical health? Do you have any risky or extreme hobbies? Is your job safe (physically) and secure? Answers to these questions may help you decide if you need extra financial protection.

• Your current insurance policies

Do you already have life or disability insurance plans? If so, dig into the details. That could help you figure out if you’ve got enough coverage or need another layer of protection in case of emergency.

These are just a few factors to consider before making a decision on credit card payment protection. And it’s not the only way to protect yourself if you find yourself dealing with an emergency.

Other Options

While credit card payment protection may work for some, you can also look at alternative options for protecting your finances.

• Build an emergency fund

Use the money you’d spend on the monthly fee and add it to your emergency fund instead. Experts recommend having an emergency fund worth three to six months of living expenses.

• Consider disability and life insurance policies

Insurance policies could potentially be more expensive than simple credit card payment protection programs, but they might also provide more comprehensive coverage. After all, these insurance plans are designed to provide financial assistance in the event of disability or death.

• Contact your credit issuer

Every creditor is different and may offer its own unique products or services. You might find that yours offers some sort of assistance plan or payment arrangements to help you take care of your bill in the event of a hardship.

How To Get Started With a Payment Protection Program

You might get the option to purchase this type of add-on product when you apply for a new credit card, and there’s also a good chance you could activate it on an existing credit card account.

Once you decide you want to pull the trigger on a payment protection program, you’ll likely be able to purchase it by phone, mail, or through your credit card’s website.

During that process, you’ll typically need to agree to the program terms, conditions, coverage type, and monthly fee structure. That could be a set flat fee, tiered fees based on your statement balance, or a specific percentage of your balance.

Types of coverage

Payment protection is generally structured as either debt suspension or debt cancellation, and your program could include either or both types.

• Debt suspension lets you stop making payments during the agreed period of time if you meet the qualifying criteria, which could be losing your job or becoming disabled. 

• Debt cancellation ends your obligation to pay the debt, in whole or part, when there’s a more extreme circumstance like death.

How To Qualify for Payment Protection

A protection program is only as good as your ability to use it, so keep in mind that there’s a process involved. You’ll likely have to demonstrate that you meet all the criteria before collecting benefits.

If your emergency is becoming sick or disabled, you may have to prove the following types of qualifying conditions.

• You’re under a doctor’s care for the accident or illness in question.

• The resulting injury prevents you from working in any job you’re qualified for, whether you were already working in it or not.

• You’ve been employed for a specified period before enrolling in the program, which may be several months.

• The disability has lasted more than a predetermined period before the coverage begins, which is often 30 consecutive days.

Your benefit period will usually be limited to a specified timeframe — for example, it could be up to six or 12 months. And your payouts are likely capped at a specific dollar amount, which will be disclosed in your program terms.

Because of all these parameters, it’s crucial to check the full program details, including conditions, exclusions and disclosures, so you fully understand the exact terms.

The Top 5 Credit Card Protection Options: Which One Do You Need?

Payment protection isn’t your only credit card account coverage or security option. Depending on your needs, another one might be better suited. And many cards may offer some form of credit card insurance or protection for free.

These are the top five protection options you may come across, and their various parameters.

#1. Credit card payment protection

This is the service we’ve been focusing on here, and it’s typically an add-on service from your creditor. You can activate it by agreeing to pay a monthly fee, which may fluctuate in alignment with your outstanding balance.

In exchange, your monthly credit card payments may be waived or paused during a specified period following an unexpected crisis, such as job loss, disability or death.

#2. Purchase protection

Credit card purchase protection sounds very similar, but this is the other side of the protection coin. While payment protection covers your monthly account payments (money in), purchase protection covers the actual items you buy (money out).

This benefit often comes with your credit card at no additional cost. It generally provides reimbursement if an eligible item you purchased with the card is damaged or stolen under the terms of the coverage.

And it’s typically secondary coverage, meaning you need to use your applicable homeowners or renters insurance to cover what you can first. Purchase protection usually only applies to the value left over after your primary insurance is exhausted.

#3. Credit card travel insurance

If you have a travel-related credit card, it may come with travel insurance benefits, including rental car insurance, trip cancellation or interruption coverage, lost or delayed luggage coverage, or travel accident insurance.

In many cases, this coverage will be secondary, like purchase protection. So it will only cover eligible expenses that aren’t already taken care of by your primary insurance plan, if you have one. And it will come with terms, conditions, and restrictions. For example, travel accident insurance may be limited to severe accidents like death and dismemberment, and only if you booked that part of the trip using that card.

#4. Identity theft protection

Identity theft protection doesn’t protect you from identity theft — it helps you catch it when it happens so you can nip it in the bud. This type of service may monitor your credit reports, credit card transactions, bank accounts and investment accounts. It might even scan court records and the dark web for any signs that your personal information has been leaked or is being misused.

Some identity theft protection services also come with related tools like VPNs and password managers. And others may provide identity theft insurance to cover your losses from the identity recovery process.

#5. Fraud protection

Credit card fraud protection is a general term that applies to many aspects of credit card ownership, including network-level security like EMV chips and credit card tokenization. But it also refers to credit card benefits like Zero Fraud Liability, which protects you from responsibility for fraudulent or unauthorized purchases if you meet the criteria and deadlines.

So if your card is lost or stolen and somebody buys something with it, Zero Fraud Liability means you don’t have to pay for that item — as long as you notify your issuer right away. Instead, the purchase price is credited back to your account. Keep in mind that your creditor will likely investigate your claim. So if they find that you actually made the purchase, their decision may be reverted, and the charge could return to your card balance.

Honorable mention: Credit monitoring

A related perk that doesn’t fall neatly into the “protection” category is credit monitoring. Some credit cards give you access to your credit score and a credit report summary for free, but active credit report and credit score monitoring usually requires paying for a subscription.

Credit monitoring services will typically send real-time alerts by text, email or mobile app if there’s a change in your credit or any suspicious activity. That could include hard inquiries, new accounts, or changes to your personal info, like your name or address. So it may alert you to some of the same things as identity theft protection, but it doesn’t normally include monitoring of public records or the dark web.

Credit Card Protection Scams and How to Avoid Them

Where there’s money, there’s a scam (or several) waiting to happen. So it’s no surprise that scams have cropped up around credit card protection.

Loss protection scams

Legitimate financial services don’t usually solicit for business — it’s up to the interested consumer to initiate the call. And they don’t typically ask for upfront payment on the spot. They also don’t swoop in out of the blue like a superhero rescuing you from an emergency while claiming you’re the victim of an alleged fraud attempt. But these schemes may do all of those things.

So if you get an unexpected phone call from someone offering you some type of credit card loss protection service for a fee, it’s most likely a scam. If they ask for payment through a gift card or crypto, it’s absolutely a scam. And even if the phone number looks legit, it could be spoofed. As for fake fraud claims, you can check your accounts for any unusual activity yourself if you’re unsure.

Account protection scams

Similar to the loss protection scams are fake account protection and monitoring offers. This type of scam may even claim to be for services that your bank or credit card company offers for free.

These scams often go a step further and ask for your login credentials so they can “secure your account.” Don’t ever give your login information to anyone for any reason — even if you initiated the request. In most cases, real services don’t need that type of info to operate.

Account compromise scams

These scams are especially harmful because they appear to be the opposite of what they are. They typically start with an unsolicited phone call, email or text message claiming that your account has been compromised. In most cases, they’re masquerading as your bank or credit card company, and they may ask for personal info like your Social Security number, account number, password or date of birth.

But in reality, the person contacting you is not trying to protect you — they’re trying to rob you. If you do actually have an account with the financial institution they’re claiming to be, it might seem reasonable to believe them. However, your real bank isn’t going to ask for all those details unless you’re the one calling them. And calling them is the next course of action if you want the truth about your account.

Fraudulent text alerts

Fraudulent text alerts come in all types of flavors, but the ones related to your bank or credit card will usually have some type of link you need to click to allegedly verify whether you made a purchase that’s been flagged as fraud. And that link may install malware on your device, or it might try to phish for your login credentials using a fake website.

Now, there’s a good chance you’re actually signed up for fraud alerts and account notifications with your financial institution. However, these legitimate fraud alerts don’t typically contain a link to click. It’s usually simply “Reply Y or N to confirm.” And they don’t use high-pressure language like “Act immediately!”

If you reply to the text and suddenly get a call from the same number, that’s also a sign of a scam — your bank doesn’t have a person sitting on the other end of an automated text alert waiting to call you when you reply. If anything, a real follow-up message will tell you to call the number on the back of your credit card.

Generally speaking, you can spot a red flag indicating a potential scam if you slow down and think logically. Scammers count on heightened emotions and the pressure of urgency. So the best thing to do is hang up (or ignore the message), take a deep breath to calm down, and contact the company yourself if you want to follow up.

These strategies can help make sure you don’t fall for a scammer’s emotional triggers, high-pressure tactics, claims of an emergency, or demands for unusual payment methods.

FAQs

What is payment protection on a credit card?

Credit card payment protection is typically a paid add-on service that charges you a monthly fee, sometimes based on your balance amount. In exchange, your minimum monthly payments may be waived or paused in case of unexpected emergencies like job loss, disability, or loss of life.

Do all credit cards have payment protection?

Credit cards generally don’t come with payment protection unless you add it and agree to pay for the service. However, many credit cards may offer this option for customers who want to subscribe.

Should I purchase credit card payment protection?

The decision on whether or not to get credit card payment protection comes down to your current situation. Weighing the pros and cons can help you determine if it’s the right move for you at this time.

Is there a time limit on credit card payment protection?

There’s two parts to this question — the protection and the benefits. Your credit card payment protection program itself will generally be active as long as you keep paying the monthly fee. But if you decide to make a claim yes, you will most likely have time limits in place. Those deadlines include requesting the benefits, proving you meet the eligibility requirements, and receiving the benefits. Depending on the hardship and program you are participating in, you could continue receiving benefits for somewhere around six to 24 months, but not usually longer than that.

Bottom Line

If an emergency occurs, the last thing you want to worry about is having to pay a credit card bill on top of whatever financial burden the emergency has caused. You also don’t want to miss payments and watch your credit score suffer.

This is where credit card payment protection can come in handy — it allows you to deal with your emergency while also remaining in good standing with your credit card issuer.

However, it’s important to know the details of your creditor’s program before signing up, consider alternative options, and weigh it all with what fits into your finances and lifestyle the best.