Blaring headlines make it hard to miss. Canadians are losing their jobs and credit is hard to come by. So don’t be surprised if your bank or even your favourite retail chain starts pitching you about the need to protect yourself.
They’re selling something called credit balance insurance. It’s supposed to protect you in case of illness or death, or if you lose your job it promises to cover your credit card payments.
But after doing some math we started to wonder whose balance they’re really trying to protect.
The cost of balance insurance can really add up. The average price is about one dollar for every $100 you spend a month. So when you’ve got $2,000 on your plastic, you’re forking over $20 a month for insurance alone.
Insurance expert Jim Bullock says these expensive premiums don’t pay off in the end, because if you lose your job, the insurance only covers your minimum monthly payment, which is usually less than three per cent of your balance.
What’s worse is how many people claim this insurance is added to their accounts without their knowledge.
Jodie Lightfoot, 27, has been unknowingly paying for this insurance on her RBC Visa for years, to the tune of $1,839.
She claims her bank didn’t ask her if she wanted this insurance. When she disputed the charges, they gave her a full refund.
We commissioned an EKOS poll and found that a quarter of the respondents either didn’t know they had it or didn’t know it was optional, and fully half didn’t understand how it worked.
In the United Kingdom there were so many complaints about this insurance the government investigated and fined lenders millions of pounds for inappropriate sales techniques. There’s even a new ban in the U.K. against selling this insurance with credit card applications.
While Canadian banks do have their own rules about selling insurance and fully disclosing credit card charges, statistics from the government’s consumer watchdog show the rules aren’t always being followed.
The Financial Consumer Agency of Canada (FCAC) has heard from almost 260 Canadians complaining about this insurance. The most common complaint is that it is added to people’s cards without their consent. But so far there has been no crackdown on the banks or retail chains.
After we showed FCAC how some people feel they’ve been misled about this insurance, they promised to look into it.
