Many credit cards offer a payment protection plan, a service which continues to make minimum payments on that credit card should you become disabled or unemployed. Some plans pay off your cards in the event of your death, too.

The more generous (and expensive) plans, like those from Chase and Discover, also offer credit protection for the good – but costly – times, like a marriage, birth or change of primary residence. Chase also offers a “payment holiday” for one month (one time per calendar year) after you face a specific covered expense of $50 or more OR for your choice of one of three holidays.

Most credit card payment protection plans cost between 39 to 99 cents per every $100 of your statement ending balance. If you do not carry a balance for a month, you don’t have to pay for the service.

Should you become unemployed, disabled or face financial hardship, payment protection plans permit you to:

• Protect your credit rating
• Lower your monthly expenses
• Have one less worry, knowing you won’t be harassed by bill collectors

Credit card protection plans vary in their policies. In some cases, you may:

• Incur finance charges during the benefit period
• Not be able to use your card during the benefit period

In today’s economy, it might seem, on the surface, like a good financial move to protect your credit rating in case you get laid off or become unemployed. But most finance experts say there are better ways to protect your credit rating.

For instance, in an article published by Smart Money online,  experts note that should you lose your job, you can phone your credit card-issuer and request hardship assistance. Issuers may lower your interest rate to 0% for the hardship period, and you won’t have to make any monthly payments. You might pay a monthly fee – similar to a credit card protection plan – for the duration of the hardship.

The downside? Your balance won’t go down at all. But credit card balances don’t typically shrink much when you’re making only the minimum payment anyway. And at least you’re not paying hundreds of dollars a year for a service you may never need.

It’s true that if you die, your estate may be saddled with large debts. However, that’s an expense a life insurance policy can cover. When you run the numbers (depending on your debt, of course) a term life insurance policy is a better investment than a credit card protection plan.

Similarly, if you have disability insurance, that policy will kick in before your credit card protection plan. Since most disability insurance is covered by your employer, this is a more cost-effective means to get credit protection. Additionally, many plans will not cover you if you are disabled only within your field. In other words, if you can do a different job (for instance, a disabled construction worker may be able to work a desk job), the credit protection plan won’t cover you.

Of course, every consumer is different, so a simple Yes or No answer cannot apply to every reader. It’s important to do the math for your situation. Here’s a straightforward example:

If you carry a balance of $5,000 on one card, and the cost of credit card protection is 99 cents, you’ll pay out $49.50 month or $594/year. Since just one late payment can knock your credit score down by approximately 50 points, credit protection plans are an “all or nothing” proposition. If you have multiple cards with balances, it doesn’t make sense to get credit protection on only one card, so multiply that by your total amount of debt. In most cases, it makes more sense to put the extra money toward paying down your balances faster and building an emergency savings account.

Another problem with credit protection plans is the fine print — coverage is not good for every situation. For instance, if you become unemployed voluntarily, or are fired due to performance issues, you are not covered. Credit card-issuers often look for every loophole to deny coverage. And, as mentioned previously, if you have other insurance, you may already be covered.

In summary, the best “credit card insurance” you can have is to pay down your balances as quickly as possible and then put the money previously used to pay your credit cards into a high yield savings account for emergency use.

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