Protection racket

A I have a credit card from HSBC and every month I pay a few pounds for a cardholder payment protection plan. I have quite secure employment and usually pay my bill in full every month so I think this is unnecessary.

Is this a standard thing with credit cards, and would I probably have to pay for a similar facility if I switched to a different credit card? The current bill has a payment of nearly ?7 for the month, which equates to ?84 for a year, which seems extortionate. Can I refuse to pay this part of my bill?

MP

A Credit card protection plans are insurance policies and there are two types. The first type protects your cards - you usually register details of all your credit and payment cards with a central administrative centre. Then, if your cards are lost or stolen, a single phone call cancels them all. The idea is that you don't have to spend hours ringing all the different card issuers to avoid getting stuck with bills run up by the thief. This sort of policy costs around ?12 a year.

What you have is a payment protection plan, which covers a set amount of your credit card repayments for up to one year if you can't pay because your income has been lost due to unemployment, sickness, accident or death. The HSBC plan costs 76p per ?100 covered.

You say your employment is 'quite secure', which is reason enough to make this policy pointless for you. But the clincher is the fact that you clear your bill almost every month - so the odds of you ever needing to claim on this policy are virtually nil.

These payment protection policies are offered with most credit cards but there is no obligation to take them out - the idea is that they offer peace of mind. But in your case, that peace of mind is unnecessary. Not to mention expensive.

Like any other insurance policy, you can cancel this agreement in writing, though you may have to pay charges for a minimum term. Unfortunately, I can't see the full terms and conditions of the HSBC plan without actually applying for the policy myself, as full details are only available once an application for the plan has been accepted!