Monday, January 18, 2010

Shedding The Last Vestiges of Credit Card Indebtedness

I started accumulating significant credit card debt in 1995. Once I started down this path, I became accustomed to living with debt. I saw my balances go up and down (mostly up) and I just paid whatever I could. I guess you could say that I expected myself to be in debt forever, especially since I also carried an onerous student loan debt (and still do.) I was really never successful in saving money and paying down my credit card debt.

At some undetermined point in my life, I decided to add a “credit protector plan” on my credit card. With the plan, I would pay approximately $0.68 for every $100 balance I had on my credit card. I wouldn’t need to pay my monthly minimum and I wouldn’t incur any interest in the event of a lay off, disability or hospitalization. Although I didn’t realize it at the time, I enrolled in this plan in lieu of having an emergency fund.

humorous pictures

Flash forward to the present. I’ve paid off my stinking credit card and I’ve also managed to squirrel away some decent dough for my EF. I’ve concluded that I no longer need the rip-off credit protector plan.

I called Citibank to cancel the plan and, as expected, I faced some resistance. Initially, the telephone rep asked why I wanted to cancel my plan. I told her, “Because I no longer carry a balance month-to-month.”

The phone rep replied, “That’s wonderful! But this plan will allow you not to have to pay your credit cards in the event of disability, layoff or hospitalization. The benefits of this plan are quite exceptional and I will mail you some information as a refresher so you can have time to think it over.”

“Uh, no thanks. Please just cancel the plan.” (Internal dialogue: "That's what my EF is for.")

Undeterred, the phone rep pressed: “Since you’ve been a loyal customer for many years, I would like to offer you a discounted price of $XX for every $100 of your balance.” (At this point, I’ve stopped listening so I don’t remember the price she quoted me.)

Strangely enough, while I wanted to yell, “Just f&#*ing cancel the d&mn plan!”, I found myself giggling inside. I composed myself and said, “I admire your persistence. But my decision is firm.” (I didn’t want to be mean to the phone rep since she’s only doing what she’s required to do. No point in being nasty to someone for her employer’s idiotic policies.)

The phone rep finally relented and said, “Okay. I will go ahead and process your request. But I do want you to know that you’ve already paid $XXX into this plan and I would hate for you to let that money go to waste.” (Internal dialogue: “Uhhh… I think it was wasted the moment I paid it.”)

“Wait a second, how much have I paid into this plan to date?”


“Wow. Thanks for canceling the plan.”

I couldn't believe that I’d wasted $853.39 over the years to insure my financial irresponsibility. Once the shock wore off, I was dance-in-my-underwear elated that I no longer have to pay this premium. For some reason, this made me much happier than any of my recent milestones. Perhaps I was happy that I could brag about my financial accomplishments without guilt to my credit card company, albeit its lowly phone rep.

But after the ecstasy wore off, I calculated that I’d charged over $125,499 on this card over the years. (I’m assuming that the cost of this “insurance” remained constant at $.68 per $100.) OMG. And that’s just one card. God only knows how much interest the cc companies have made off of me...


444 said...

I think those plans are rip-offs that almost never, and I mean "do they ever?" pay anyone for anything. All you have to do is conduct a quick internet search and the evidence is rife that credit protection plans only serve to fatten the credit card issuers' bottom lines. They're a bonus fleecing of their customers; gravy for them.

Glad you got rid of it. Sorry you had to hear the figure read aloud. Don't look back! Be glad you learned and moved on.

Justin said...

I've never had the guts to calculate how much money I've put on my credit cards over the years I've had them...think I might be disgusted with myself if I knew.

Love the blog; I'll be sure to check in regularly!

jpkittie said...

holy smokes that is crazy! Good for you for canceling!

Money Funk said...

LOL. It's amazing when we are financially blinded what we will sign up for. That's alot of protection fees they collected! Good for you on cancelling.

I go the same resistance when I cancelled my BofA card. "Why are you cancelling ma'am?" he asked. "Because I am tired of paying finance charges, your APR is too high, I'm a valuable customer and yet you just raised my APR, I don't want to pay an annual fee anymore, and... Oh ya, because I am paying off and closing all my cards.". Needless to say, there was a quiteness on the other side of the phone. LOL. I enjoyed it. But I too, wanted to say that grumbling sentence you added in your post when they kept trying to get me to keep the card.

Job well done. ;)

Miss M said...

Wow, no wonder they didn't want you to cancel! They've made a lot of money off of you. I hate arguing with the customer service rep, I know they are just doing their job but after the 2nd no they really should just drop the spiel and let you get on with your day.

Ms. MoneyChat said...

gee whiz. that's amazing how that little .68 added up over the years.

Kevin said...

I don't think that means you have charged over $125k on the card. The way I understand it, you pay that amount monthly on the balance. so if you charge $100 and roll it over from month to month... you'll pay $8.16 over the course of a year for the plan on that $100 revolving balance.

Personally, one of the highlights of my life was when some phone peon was trying to convince me to activate a credit card. "You'll want it in case of an emergency," they stated.

"In an emergency, I would use my savings account which currently has a higher balance than the card you're offering," I retorted.

"Oh. Well it's very convenient to have a credit card around."

LOL... she had no response to someone who actually had real funds in place should an emergency arise.

When I got a card, I got suckered by this plan. But I was under the impression that, so long as I didn't carry a balance, it was free. At the end of the first month, there was a charge for just over $3 for having the plan. I called up and demanded to know what was going on. That representative explained that the charge was for the balance each month... regardless of whether or not I paid it off. I immediately canceled the plan and demanded a refund of the charge. After a token argument, it was taken care of and the refund posted on my account the next month.

Those plans are such a ripoff. And, the reports I have read from people who needed to use them... suggests that they aren't really providing the protection you thought.