The pros and cons of card protection insurance
By Kate Saines
If you've ever been a victim of card fraud or had your credit or debit cards stolen you may well have considered taking out card protection insurance.
In fact, if you reported the crime to your bank, it may well have suggested you take out some kind of insurance, such as credit card protection, by way of a safety net in case your card is lost, stolen or used fraudulently again.
But the recent furore over Payment Protection Insurance (PPI) and other high profile scandals involving our high street banks have ruined the trust we once had in our financial services providers.
Thanks to campaigners and consumer groups, it has emerged that millions might have been sold payment protection plans that they did not really need when they took out loans.
Now the banks have said they will pay compensation to all those who were mis-sold PPI.
The question is will this lead the increasingly financially alert public to question the validity of similar schemes like credit card protection insurance?
Here's the lowdown so you can decide for yourself.
What does card protection insurance do?
For anyone who has never come across card protection insurance before, these are policies which provide you with cover against loss, theft or fraud of all your credit cards, debit cards and store cards.
In return for a premium of around £40 a year, you will also receive access to a 24-hour emergency helpline which will allow you to cancel your cards.
Some more sophisticated policies provide assistance if you run into trouble with your cards abroad, cover for cards belonging to other members of your household and some even cover for the loss of your keys.
Take Barclaycard, for example. It promises Barclaycard Card Protection will insure all of your cards against fraudulent use and in one quick phone call all your cards will be cancelled and arrangements put in place for their return.
It offers up to £100,000 insurance for any fraudulent transactions made after customers have reported their cards have been used by others.
It also includes up to £5,000 insurance before the loss or theft has been reported – provided you have notified Barclaycard within 24 hours of discovery.
And there are some added extras like cover for loss of keys, and a service to help you get back into your house if your keys go missing. This costs £39.99 for a year or £89.99 for three years.
Often card protection insurance comes as one of the additions to a packaged current account. Halifax, for example, offers its card protection insurance, Card Care, as part of the Student Current Account. It means students will be entitled to cover for all registered debit, credit, store and charge cards at home or abroad.
What are the advantages?
Barclaycard provides its card protection insurance though a company called CPP, which also provides the product in its own right.
According to CPP, if you do not have card protection of any kind, and your purse or wallet is stolen you will have to make a number of calls to all the relevant card companies, at your expense, to get them cancelled and new ones sent out.
With insurance you make just one phone call and it's free. CPP calls all your providers to get new cards sent out.
If your card is used fraudulently, CPP promises to cover you even for unauthorised payments that your card issuer will refuse to pay.
And CPP also provides policies which offer cash advances if you discover your cards have been stolen just as you are about to make an essential payment – for a hotel bill for example.
With cover available for items like passports, driving licences and keys you are basically receiving insurance for your entire handbag with these policies.
Read more: How to pay nothing for the benefits of a credit card
Disadvantages
The problem with card protection insurance is that buying it means you are probably paying for a service you already have access to.
For example, if you are paying with a credit card, you will automatically be protected if anything goes wrong – if the purchase is more than £100 and less than £30,000 - thanks to section 75 of the Consumer Credit Act 1974.
Dan Moore, money insurance expert at Which?, said: "We don't think [card protection insurance is] worthwhile as it offers nothing you don't already have through consumer law such as Section 75."
Although this only applies to credit cards and store cards, it's worth remembering this piece of law is very powerful to the consumer.
Even if you mainly use a debit card, you'll still be covered if it's stolen or used by fraudsters.
Mr Moore said: "If you are the victim of fraud and have not acted negligently or carelessly, you can claim from your card provider."
We phoned Barclays Bank to find out what would happen if our cards were, for example, used fraudulently online.
We were told without card protection in place the bank would investigate and unless it was found we had done something to compromise our card details we would receive back the money spent fraudulently after 30 days.
Having cover for keys, passports and other items might sound like a bonus. But check your home contents insurance or travel insurance policies and you may find you are already covered.
Barclaycard's offer to pay for a locksmith should your keys get stolen and you are locked out might sound tempting – but wouldn't it be cheaper to leave a spare set of keys with a trustworthy neighbour?
Alternatives
You can, of course, invalidate the need for a card protection insurance policy by taking practical steps to keep your cards safe.
CPP suggests instead of keeping all your cards in your wallet, only carry the essential ones when you go out, and avoid leaving them loose in your bag or pocket.
It's also important that you never write down a PIN or allow a store assistant to take your card out of sight during a payment.
A large number of fraud takes place at ATMs so ensure you shield the keypad when you take out money and avoid machines that look like they might have been tampered with.
If you find your cards are missing or have been used without your knowledge you must report the loss to your provider immediately as this will limit the damage.
According to CPP consumers take an average of more than eight hours to report their cards lost or stolen and this gives plenty of time for fraudsters to spend on the card.
Finally, if you are thinking of taking out card protection it's essential you weigh up whether the cost of a policy is really worth it when so much protection is already in place.
Of course the main downfall is that without card protection you'll have to phone round lots of companies if your cards go missing.
But this could amount to you paying £40 just to make one 'free' phone call.
Use the Myfinances.co.uk comparison tables to find the best deal on a credit card.
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