Beware of Credit Card Add-Ons

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By Maureen Mahoney on Thursday, September 17th, 2015

In recent years, banks have been attracting some unwanted attention about their add-on credit card products.

In July, the Consumer Financial Protection Bureau (CFPB) fined Citibank and its subsidiaries $700 million for deceptive credit-card add-on marketing practices, which affected about 7 million consumer accounts.

One example of a credit card add-on is Citibank’s “Credit Protector,” which is also the subject of a recent class action suit. According to David Lazarus of the Los Angeles Times, it’s insurance for your credit card. The customer pays a monthly fee for the service. If the customer loses his or her job, they can choose to take advantage of a two-year grace period. During that period, the customer won’t be penalized for not meeting their monthly credit card payments.

We think add-ons are usually worthless and generally advise against purchasing them.

Citibank charges consumers less than $1 per $100 of the “New Balance” per month for Credit Protector. That doesn’t sound like a lot, but as Lazarus points out, if you’re carrying a lot of debt, you could end up paying hundreds of dollars each month.

Why should consumers be wary of these products?

  • There are some tricky terms and conditions. According to Lazarus, one credit protection customer found himself shut out of the benefits – even after paying $200 a month for the service – because he hadn’t notified Citibank within 180 days of losing his job.
  • The CFPB claims that Citibank didn’t fully inform customers of the costs of credit card add-ons.
  • According to the CFPB, Citibank signed up customers for add-ons without getting a clear go-ahead from them.
  • The CFPB also says that Citibank signed customers up for add-ons, even though they weren’t able to take advantage of the benefits.

Citibank is not the only bank that has gotten in trouble over credit card add-ons – the CFPB has taken 10 actions against companies over these types of products in the last four years.

What can you do to protect yourself? Read your bill carefully and watch out for unexpected fees and charges. There are numerous instances, including Citibank as noted above, where consumers were enrolled in these programs without their knowledge or consent.

If you get burned by a credit card add-on, complain! Contact the CFPB and tell them what happened. They will contact the company on your behalf and work to resolve the problem.

And, if you’ve had a bad experience with a credit card add-on, please share your story with us.

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