Credit cards are one of those financial products that have completely revolutionized the way the financial world operates. Plastic cash has more or less replaced hard cash transactions in most countries due to the ease of payment. Ever since its introduction in the 1950’s, credit cards have become indispensable to most individuals.
In addition to allowing customers to purchase products on a credit and repaying the same at a later date, credit cards also provide a number of other advantages such as Reward points, discounts, AirMiles as well as the option to pay bills. This benefit is highly useful as individuals can pay not just their utility bills but also their insurance premiums very conveniently.
Insurance plans are highly popular today as opposed to the scenario a few years back. Unpredictable markets, economic instability and so on are reasons that are compelling individuals to purchase a life insurance plan. By doing so, individuals can protect their’s and their family’s financial status in case of their untimely demise. A number of companies today provide life insurance policies with different benefits and premium payment tenure so that it is convenient for the customers.
Individuals can pay their insurance premium payments through a number of methods such as internet banking, auto-debit and also through credit cards and debit cards. Considering the importance that credit cards have in an average individual’s life, it is a given that most would prefer to pay their insurance premiums through credit cards. But is this method advantageous or does it come with its own set of issues? This article attempts to address the same.
Payment through credit cards is very convenient as all individuals have to do is to provide their card details and the premium amount would get automatically debited. Auto-debit option is also provided by a number of insurance providers. Therefore insurance providers allow customers this option as it is exceedingly convenient. The advantage of such a method is that, customers are not likely to miss their payments as it gets debited automatically (if this option is selected).
However, this option may be slightly problematic if customers wish to change their insurance provider or if they wish to change the card that they are paying from. Hence, only if policyholders are completely convinced about the card that they wish to pay with and the insurance policy, they can opt for this choice.
An advantage that customers can avail is that they will not lose their bank balance as soon as the payment is made. The flow of cash can be delayed making it easier for them to manage their finances. In case the individual is unable to make payments immediately or cannot afford, paying for the same through a credit card will give them enough time to cover their expenses. However, customers will have to bear in mind this money will have to repay in their next billing cycle else they can rack up debts because of this.
One of the biggest advantages of using credit cards is the rewards and perks that are provided every time the card is used. Similarly, making payments such as life insurance premiums can also help in racking up Reward Points and other benefits. Additionally, the more amount charged through the card, higher is the number of rewards that can be availed. Therefore paying the insurance premium in the form of a lump sum amount or even monthly will ensure that cardholders receive rewards and perks that can be utilized by them.
However, paying through credit cards are not always advantageous. One of the reasons is that, an additional fee will be charged that is over and above the premium payment as the insurance company will have to pay a fee to the credit card company. Although this fee may not be substantial it will add up after a few payments. The total amount paid as extra fee will end up being quite high.
Paying insurance premium through credit cards has its set of pros and cons. Paying through credit cards provides rewards but if the credit card bill is not paid in time, it can lead to additional interest being charged which results in the individual falling into a debt trap. Even if the bill is paid in full, the balance of the card may differ which could lead to changes in their credit score.
However, if payments are made on time and bill is paid completely, paying through credit cards will have its advantages. Doing so will make it exceedingly convenient for policyholders and they can also pick up additional perks on the way. Therefore, customers should weigh all the advantages and disadvantages of paying their insurance premium through credit cards before actually doing so, depending on their needs and requirements.