It makes sense to compare home insurance, car insurance and other essential cover carefully to find a policy that suits your budget. But how do you choose to pay your premiums?
For many of us, our credit cards are such a ubiquitous presence in our wallets that they can be the first form of payment that we reach for, whether we’re paying bills or making routine purchases. If you’re planning to use your credit card to pay your insurance premium, then consider the pros and cons of using credit to make this payment carefully before you turn to the plastic.
Pro: Using a Credit Card to Pay Insurance Premiums is Convenient
Paying bills using a credit card is often much easier than remembering to fill out a cheque for the premium, stick it in an envelope, and get it mailed out in time to post to your account prior to the due date. If your insurance premium is due monthly, then you also save the cost of an envelope and postage each month by paying with a card.
Con: Using a Credit Card to Pay Insurance Premium is Too Convenient
The convenience factor of paying insurance premiums by credit card can work against you. While it may be convenient to pay by credit card, it may be less convenient to remember to pay the charge off before you’re charged interest on the insurance premium payment. In this case, you’ve upped the cost of your insurance premium when you add in the additional interest charges.
Pro: Paying Insurance Premiums By Credit Card May Help You to Avoid Fees
Imagine you’ve been so busy that you’ve let paying your monthly or yearly insurance premium totally slip you’re mind. Now, it’s the morning of the day your insurance premium is due, and there’s simply no time to get the cheque to the insurer.
If your payment is late, you may be assessed a late charge, or your insurance may even be cancelled if you make a habit of missing premium payments. In this case, paying by credit card may make sense. You’ll avoid any fees associated with late premium payments, or the even bigger potential problem of a cancelled policy. Having your insurance policy cancelled due to non-payment of a premium can create credit and insurance headaches that will stay with you long after the payment date has passed.
If you are over 14 days late to make a payment, the insurance company may refuse to pay any claims until your account is paid up to date. If you leave it for 30 days, the insurer may cancel your policy. Your insurance company may sock you with an increased premium in order to reinstate your policy, or may decline to reinstate it at all. As though this were not bad enough, other insurers may be wary of insuring you if you have a prior cancellation for non-payment on your record.
Con: Increasing the Price of Your Insurance By Paying With a Credit Card
If you’re paying your insurance premiums by credit card because you otherwise could not afford the payment, you’re raising your insurance costs exponentially each month that you carry a balance on your credit card instead of paying it off in full. The average credit card interest rate is around 15%; if you charge your insurance premium to a credit card but don’t pay it off before your next credit card statement arrives, then you’re adding 15% to the cost of your insurance each month.
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