Everyone likes to complain about how their credit card is ripping them off, but what they don’t realize is that it really, probably is. Credit card issuers profit by squeezing as much money as they can out of you, the consumer. Typically, this involves encouraging you to run up a balance so that the issuer can reap the interest.
However, since consumers are becoming more and more cautious about going into debt, card companies today have to figure out more subtle ways of winning your hard-earned cash. That’s why they’ve started advertising a heap of “helpful” services and products that are nothing more than thinly veiled attempts to make money at your expense – and America is falling for it hook, line and sinker. Don’t believe us? Then see if any of these services don’t ring a bell.
1) Payment Protection Plans
Credit card companies are trying to get as many people as possible to sign up for their new payment protection plans. These plans act like a sort of insurance: your payments will be suspended if you’re injured or unable to work, so you won’t go into debt. However, what the card companies don’t tell you is that the fees for these plans are so high that if payment protection were legally considered to be a form of insurance, the fees would be illegal. In addition to costing up to $300 a year, many of these plans have hidden conditions that force you to jump through dozens of hoops before the protection kicks in. When you add it all up, they’re just not worth it.
2) Identity Theft Protection
The CARD Act has made identity protection plans like the one offered by Discover completely obsolete. Since you’re now only liable for $50 worth of fraudulent charges if your credit card is ever stolen, there’s no point in shelling out a monthly fee just to have your card issuer call you every time an account is opened on your credit report. To be honest, even before the CARD Act passed, the plans were kind of a rip-off. Identity theft protection doesn’t really protect you from anything – it just means you’ll be getting a lot of unwanted phone calls. Not worth it, in our opinion.
3) Prepaid Debit Cards
Prepaid debit cards might be the most hypocritical product on the market. Card companies and celebrities advertise these diabolical little pieces of plastic as a great way to rebuild your credit rating when in fact the cards don’t report to the credit unions whatsoever. On top of that, these cards come loaded with fees. If you want to take money out of an ATM, it will cost you. If you want to deposit less than the minimum amount of money (keep in mind, this is your own money), it will cost you. Everything about them is just downright bad for consumers, especially consumers who are already struggling with bad credit.
Credit card companies have a bad habit of offering to help with one hand while they stab you in the back with the other. When it comes to all of these additional services that they claim will help keep your identity secure or rebuild your credit score, it’s best to just say no. Even if you’re thousands of dollars in debt, it’s much better to grin and bear it than it is to invest in a financial service that smells like snake oil.