Insurance

Some credit card issuers may offer you free insurance when booking flights, or perhaps 100 days insurance cover on any item purchased with your credit card that cost over £50.

Do not expect every credit card to offer this feature, as many of the newer credit cards on the market do not provide it. It is also worth bearing in mind that many of these policies have a fairly limited value, as you may be covered for most household purchases under your existing contents cover; many credit card insurance policies will not pay out if you are already covered under another policy.

The travel cover usually only covers a very limited range of problems, often only applicable if you have an accident abroad. This type of insurance should not be seen as a substitute for a comprehensive travel insurance policy.

When comparing two credit cards, if everything else is the same, then this sort of cover may make the difference. However, it should not be a major influencing factor on your decision, as this kind of free insurance is very rarely claimed upon. These insurance policies, in general, are used as a marketing ploy to attract more customers to a credit card.

Payment Protection Insurance

You will usually be offered this when you apply for a new credit card. This type of insurance covers against any problems that result in an inability to make your repayments (such as long-term illness). We advise you to evaluate the terms of this kind of policy very closely, as they are usually extremely limited in scope (they are unlikely to cover pregnancy or a pay-cut at work), and are fairly expensive.

Think of Purchase Protection Insurance as the credit card equivalent of the extended warranties offered on electrical goods by many retailers. Although they do help some people, the credit card companies invariably make a substantial profit on these sorts of policies.

Our consumer protection page takes a look at the extended warranties that are offered by some credit card companies when purchases are made using their credit card.