payment protection insurance
Payment protection insurance is designed to
help you pay debts such as your credit card bill, mortgage or
personal loans in the event that you are unable to work
through accident, sickness or unemployment. But this insurance is
often bought by default because it is often automatically
included in quotations.
PPI typically costs between 0.7 and 0.8 per
cent a month per £100, so a PPI charge of 0.76 per cent will cost
you 76p per £100 of cover. Anyone taking out PPI cover and who
makes only the minimum monthly payment on a credit card each month
may see their balance creep up over time, even if no new purchases
are made.
This is because some credit card providers
have cut their minimum monthly repayment requirement to 2 per from
5 per cent, so that a combination of PPI costing 0.76 per cent and
the interest payable on transactions, could be more than the
minimum amount you are required to pay.
Cards which consumers should beware of in this
respect are Leeds & Holbeck building society’s Mastercard and
the credit cards from Barclays, More Than and Create. Card issuers
which require higher minimum monthly repayments (and therefore
avoid this conundrum) include MBNA, Abbey and Virgin.
PPI policies don’t usually cover the
unemployed, self employed and temporary workers. Cover usually
lasts for 12-18 months only, so it is only designed to tide you
over for a short period of unemployment or until you are well
enough to work again.