If you’ve obtained a credit card in the past few years, it’s likely that the associated credit card company has attempted to sell you additional services that they offer. Identity theft coverage. Debt consolidation. Credit score tracking. These are all services that credit card companies urge customers to purchase. They sound logical and enticing at the time of the company rep’s pitch, but are they really worth it? Each person has a unique financial situation. However, the universal answer to this question is a resounding, “NO.”
These are six examples of supplemental services offered by credit card companies that you ultimately do not, and will never need.
Identity Theft Coverage/Insurance
Identity theft coverage/insurance is a “convenient” service offered by many credit card companies that promises financial protection in the event that a customer falls victim to fraudulent charges on their cards. While the the idea makes sense in theory, many customers aren’t aware that they are already protected by default (and for free) from identity theft. The Truth in Lending Act protects cardholders from being responsible for more than $50 in fraudulent charges if they report the illicit activity as soon as possible.
This is why it’s pointless from all angles to purchase identity theft coverage/insurance. Some card companies will also warn you that this type of coverage is useful in dire situations where other cards, or even your Social Security number, have been compromised. Even if you’re looking to avoid these scenarios, your money is better spent on a paper shredder. It simply doesn’t ever make sense to purchase identity theft coverage/insurance.
Missed Payment Coverage/Insurance
This type of protection has become more popularly offered by credit card companies as of late. Many sales reps will attempt to sell this coverage by explaining that your payments can be placed on hold for literally years if you ever find yourself in a financial catastrophe. Card companies will generally charge around 5% of the total outstanding balance in fees for this service. While it sounds useful at face value, this one takes a bit of contemplation to understand how pointless it is.
Consider the fact that the odds are slim to none of you being in a financial catastrophe for years on end. If you are a responsible card holder, it’s likely that you rarely carry a balance from month to month. In this case, this coverage has no real purpose. Missed payment coverage could be useful for a cardholder who carries large balances, but even then, it’s risky in general to carry hefty balances at any time. A savings account that you casually manage would be more useful for a missed payment safety net than this phony service.
Credit Score Tracking
To the average person, their credit score means quite a lot. However, credit score tracking provides 24/7, ongoing access to it. In the grand scheme of things, this is virtually never necessary. This is especially true if you’re going to be charged for it. While you might be able to think of semi-reasonable scenarios in which this service would help, you could probably realistically live without it.
Credit scores change with time, and while everyone would like to keep closer tabs on their particular performance, it’s just not necessary. If you’re doing everything you can to positively impact your score, there’s absolutely no sense in paying fees just to watch those magical numbers change on a computer monitor. It’s much more sensible to grab a yearly report from AnnualCreditReport.com at the start of each year. Even the major credit bureaus such as TransUnion, Equifax, and Experian offer users extended access for a price. This type of privilege is almost never necessary when it all boils down.
Debt consolidation is a service seen more commonly offered by businesses rather than card companies. These businesses are incredibly good at making debt consolidation out to be a catch-all solution. However, it is nowhere near being what it’s cracked up to be. Debt consolidation businesses attract their customers by advertising low and manageable monthly payments. What they don’t spend too much time talking about is the fact that debt consolidation greatly increases how long a person stays in debt. Likewise, the person in debt will end up paying much more in the end than they originally owed.
Try to think about it like this: no creditor would ever actively restructure a person’s debt if they weren’t after some sort of cut. With that in mind, it’s quite obvious that debt consolidation never lowers debt or makes it easier to manage. Debt consolidation companies are in the business to merely move your debt around so that it’s temporarily more easy for you to manage it. That’s it. You should always avoid these types of services if at all possible.
Credit Score Repair
Because the world is largely in debt, credit card companies notoriously offer credit score repair services to their customers. This offer tends to work on those who are not familiar with how credit scores work and are also under the impression that a magic wand can be waived in order to alleviate credit score woes.
When broken down, credit scores are not mysteries to be intensely explored. A credit score quite literally boils down to five counterparts. These are the length of the credit history, payment history, amounts owed / outstanding balances, new credit lines, and credit types used.
That’s it. Credit repair services cannot be manipulated with special services or tricks. When you purchase a credit repair service, you are essentially paying for things that you could already do without help. This includes steadily minimizing outstanding balances, paying bills on time, monitoring how often you open credit cards, and so on.
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