How IUCC Protects a Credit Card Against Job Loss

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How IUCC Protects a Credit Card Against Job Loss

When you feel like your employment is on the verge of being cut, you’re always thinking about every payment you have and how you’re going to pay it. Buying involuntary unemployment credit card (IUCC) insurance that promises to make payments on your credit card balances while you are jobless sounds like a brilliant idea amid this tidal flood of numbers. But, in the long term, does it benefit you?

What is IUCC Insurance?

This is a policy that is often provided by your credit card provider to cover payments during a time of unemployment. Loss of self-employment or resignation will not be covered. The pricing of this service varies depending on the provider. However, it might be as high as 1% of your monthly balance.

The expense of IUCC insurance is worthwhile for certain individuals, but not for others. You must determine how long you will be out of work, how close you are to paying off your credit cards, and if you can make the payment without purchasing involuntary unemployment credit insurance.

(For further relevant reading, see Credit Scams to Avoid.)

When IUCC Insurance Makes Sense

Assume you have a $2,000 debt and your credit card insurance provider costs you 1% per month for IUCC insurance. Your insurance cost is $2,000 x.01 = $20 per month. Your minimum payment is 3% of your balance, which is $60. You anticipate to be laid off in two months and don’t expect to find another employment for at least two months. Your total monthly cost with credit card insurance is $80.

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When IUCC Insurance May Not Make Sense

Assume you have $5,000 in credit card debt and the monthly cost of credit card insurance is one percent of your amount. Your monthly insurance premium is $5,000 multiplied by.01 equals $50. You assume a layoff may occur in the coming months, but you are unsure. Your monthly minimum payment is three percent of your outstanding debt, or $150. You can afford the payment right now, and you can save the $50 per month you won’t have to pay for involuntary unemployment insurance in your savings account for future installments.

If the layoff had not occur for six months, you would have paid a total of $300 ($50 x 6), which could have been put into a savings account to meet future payments or paid down your amount by $300. If you didn’t lose your work, you’d just be out the money for the duration of the insurance.

Check IntoPayment& Cancellation Policies

You should inquire about how long in advance the payment is made in order to avoid late payments on your credit record. If payments are not recorded on time, you will have a late payment and your credit score will suffer greatly. 1

Unemployment credit insurance may be expensive. If you have a new employment, be sure you can cancel your insurance swiftly.

You want to ask questions such as:

  • When is the invoicing date for insurance?
  • How long in advance of the billing date must you be told for me to avoid being invoiced for the following month?
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When you acquire this information, write it down or add it to your notes app. Put both the billing date and the cancellation date on your calendar for the following six months.

Alternatives to IUCC

  • Rather of purchasing IUCC insurance, strive to pay down or pay off your credit cards and/or limit your spending so you have a sustainable budget before being laid off.
  • Examine other expenses that may be placed on hold without penalty before purchasing IUCC insurance. Before you get your layoff notice, contact your student loan lender to learn about your alternatives for deferring payments.
  • Turn on the financial emergency mode. Reduce any needless spending to speciality food products and put the money in a savings account in case you lose your work.
  • As soon as you get your layoff notice, apply for a new job. Beforehand, update your CV and search online employment sites for prospective new jobs.

The Bottom Line

You want to maintain your credit in all conditions. You do, however, have alternatives to involuntary unemployment credit insurance. Only get insurance if a layoff is imminent and the job market is sluggish. Otherwise, consider your other possibilities and be prepared ahead of time with a layoff-ready budget, a healthy savings account, and ready-to-go resumes. Your employment may be in jeopardy, but having a stable financial situation might mitigate the damage.

(For further information, see Expert Tips for Reducing Credit Card Debt.)

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