Credit card companies try to lure you with gimmicks

Open a credit card account and you might walk away with more than just plastic.

Banks and their vendors heavily hawk card-related services, such as credit monitoring, that can add up to hundreds of dollars of year in fees.

But often consumers don’t need these add-ons. In fact, they can take a few simple steps for little or no money and enjoy protections and access to information similar to what’s promised by the services.

Federal regulators have taken note and action.

Regulators recently ordered Capital One Bank to refund about $150 million to 2.5 million customers who were pressured or misled by the bank’s vendors into buying card products they didn’t want or couldn’t even use.

With consumers counting every penny these days, it makes no sense to pay for services of questionable value.

Here are some card services you likely don’t need:

Payment protection

This product typically promises to cancel debt or suspend minimum monthly payments if the cardholder experiences a job loss or disability.

Monthly premiums are tied to balances.

“It’s not cheap coverage,” said Gerri Detweiler, director of consumer education for Credit.com, a card comparison site. “And part of the issue is when folks go to collect, a lot of times they run into various roadblocks in the fine print that make it difficult to collect.”

Payment protection has been highly profitable for banks, though. The GAO says that customers of the nine largest card issuers paid about $2.4 billion for payment protection in 2009, but received only $518 million in benefits.

This was one of the products pushed by Capital One’s vendors and was the subject of consumer lawsuits.

Some major banks have backed off it.

The latest to do so is Bank of America, which stopped selling payment protection to new credit card customers last month. Bank of America says customers already enrolled will continue to receive the service for six more months for free before it’s canceled.

Consumers would be much better off depositing the money they pay for this service in the bank and establishing an emergency fund. In a matter of months, they could have enough set aside to either pay their balances if they fall on hard times or at least keep up with minimum card payments.

Also, just about every issuer offers payment plan or hardship programs, something the card companies don’t tell you when marketing payment protection offers, says Curtis Arnold, founder of the card comparison website CardRatings.com.

Credit monitoring

Some issuers and companies offer credit report monitoring as an identity theft protection service that often runs about $15 per month. The service is not worth the price, card experts say. Card issuers have a legal responsibility to protect a customer from fraud, and they have developed sophisticated methods to quickly spot suspicious charges.

“It galls me to no end that they make money off something they should be doing to protect their customers anyway and save themselves money,” said Linda Sherry, a spokeswoman in the Washington, D.C., office of Consumer Action, a nonprofit advocacy group.

Arnold notes that credit card customers are generally covered by zero-liability policies, so they wouldn’t be held responsible for fraudulent charges to begin with.

Consumers can do their own credit monitoring for free by frequently reviewing their accounts online, Arnold said. They also can set up email or text alerts that will notify them when the card is used or when purchases are made above a certain dollar amount.

People can monitor their credit reports by taking advantage of a federal law that entitles them to one free credit report annually from the three major credit bureaus: TransUnion, Equifax and Experian. This is available at www.annualcreditreport.com or by calling 877-322-8228.

If you want to prevent a thief from opening new lines of credit under your name, put a freeze on your credit report. This prevents a new creditor from seeing your report, which means it’s unlikely to allow anyone — you included — from opening new credit.

Card registration

Lose your wallet or purse, and you will have to notify all the card issuers to get replacements. For a fee, you can register your cards with a company that will make those calls for you. American Express’ Lost Wallet Protector, which also can help replace a lost passport, costs $39.99 a year.

Ben Woolsey, director of consumer research for CreditCard.com, a card comparison site, says this is unnecessary.

“Why not do it yourself? Make a few phone calls and save yourself some money,” he said.

If you used a card registration service, you would have entered your card information when you signed up, he said. Collect this information for yourself and keep it in a secure location in case you lose your wallet and need to call the card companies.

Card issuers will continue to pitch extra services for a fee, but Consumer Action’s Sherry says most consumers may not realize that the best perks are free.

For example, some cards provide purchase protection, which reimburses consumers if an item purchased with the card is stolen or damaged within 90 days, she said. Others automatically extend the warranty of products paid for by credit card. And some cards offer concierge services, she says, which can help with ticket purchases and vacation planning.

More in Herald Business Journal

Snohomish County’s campaign to land the 797 takes off

Executive Dave Somers announced the formation of a task force to urge Boeing to build the plane here.

A decade after the recession, pain and fear linger

No matter how good things are now, it’s impossible to forget how the collapse affected people.

Panel: Motorcycle industry in deep trouble and needs help

They have failed to increase sales by making new riders out of women, minorities and millennials.

Costco rises as results display big-box retailer’s resiliency

Their model has worked in the face of heightened competition from online, brick-and-mortar peers.

For modern women, 98-year-old rejection letters still sting

In a stark new video, female Boeing engineers break the silence about past inopportunity.

Tax reform needs the public’s input on spending priorities

The GOP tax plan is a good idea, but the next step should give us a voice on how taxes are spent.

Commentary: GM, Boeing fight a war of words over Mars

Boeing is strongly signaling how crucial deep-space exploration is to its future.

Under cloud of ethics probes, Airbus CEO Enders to step down

He leaves in 2019 after 14 years. Meanwhile, aircraft division CEO Fabrice Bregier leaves in February.

$4.99 sandwich promotion irks some Subway business owners

Management insists that “most franchisees support the promotion.”

Most Read