In this article:
Identity theft and fraud protection for your finances, personal info, and devices.
How Does Credit Protection Work?
Credit protection services help you monitor, safeguard, or recover your credit. There are multiple services and tools that claim to protect your credit, insure purchases, and prevent fraud — but not all of them are worth paying for.
The main types of credit protection that most people can benefit from include:
- Credit card protection insurance. Sometimes known as “payment protection” or “credit shield,” credit card protection insurance is a paid feature that gives you a break on your credit card payment obligations in the event of a major life change — such as losing your job or sustaining an injury.
- Credit score and report protection. These companies track your credit reports and scores for you, spotting unusual or even fraudulent activity (new credit card accounts, large transactions, or consumer credit inquiries) so that you can address them quickly.
- Other credit protection services. If you’re making a big purchase or going on an international trip, you may want protection against theft, accidental damage, or loss. Some credit cards include insurance in their terms, but others don’t — or at least not to the extent that you’d want. Travel insurance, guaranteed asset protection (GAP), and other purchase protection products can give you peace of mind.
To help you understand which credit protection plan(s) you might need, we’ve outlined the pros and cons of each one along with our take on whether or not it’s worth buying.
The 5 Main Types of Credit Protection (and Who Needs Them)
1. Credit report and score monitoring
Credit monitoring services alert you to changes in your credit report and credit score, whether resulting from hard inquiries or late payments that you recognize — or from fraudulent uses of your credit that you don’t.
Each major credit bureau has its own free credit score monitoring tool, and every American can request free credit reports from all three bureaus each week by visiting AnnualCreditReport.com.
But the best paid credit monitoring services do this automatically — providing three-bureau credit monitoring (Experian, Equifax, and TransUnion), one-click credit lock, and credit history and score updates — all from a single app.
Example of how you can benefit from credit monitoring: You recently shopped online during a holiday sale but unknowingly entered your credit card details on a fake website. A few days later, you receive an alert from your credit monitoring service about a personal loan application in your name. Your credit monitoring service places a fraud alert and freezes your credit. Your plan happens to come with insurance, so you file a claim for costs incurred while resolving the fraud.
Who needs credit monitoring? Is it worth paying for? Everyone can benefit from credit monitoring, but it’s especially worthwhile for anyone who’s been a victim of data breaches or identity theft in the past, as scammers are most likely to use stolen information to try and open credit accounts in victims’ names.
2. Credit card protection insurance
Credit card protection insurance (sometimes called “payment protection insurance” or “credit insurance”) is a type of insurance that helps cardholders manage credit card debt when facing disability, job loss, or death.
Under these policies, insurance companies make the minimum monthly payments on your behalf or significantly reduce your required monthly payment. Typically, you pay for credit card protection insurance monthly, and the fee is based on a percentage of your outstanding balance.
Example: You just started a new job in a volatile industry, so you enroll in credit card protection insurance for your primary card. Six months later, you’re unexpectedly laid off. After you file a claim, your insurance will cover minimum payments until you secure a new job.
Who needs credit card protection insurance? Is it worth paying for? If you’ve got limited savings, uncertain job security, and need to support a family, credit card protection insurance might be worth getting. Just be sure to read through your coverage carefully to avoid coverage gaps or denied claims.
3. Purchase protection
Purchase protection covers the cost of theft or damage to new retail purchases. Most credit card issuers offer some kind of purchase protection, but terms vary from card to card. Read the fine print to see:
- If you have to manually register for purchase protection or if it’s applied automatically.
- What’s covered — items like software, pre-used items, boats, and medical devices are likely not.
- How quickly you have to file a claim. You may also be required to submit supporting documentation, such as your credit card statement, original receipt, police report, and insurance declaration page.
- If your issuer caps payout amounts per claim or per year.
- How long it takes to get reimbursed. This could impact your ability to make additional purchases on your card.
Example: You buy a new laptop and charge the purchase to your credit card. The laptop falls out of your backpack a few weeks later, causing irreparable damage. Unfortunately, your warranty doesn’t cover it, but your purchase protection program does. So you file a claim, and your credit card reimburses you for the loss.
Who needs purchase protection? Is it worth paying for? Before you make a big purchase, check your credit card’s benefits and the item’s warranty plan — they may give you the coverage you need. If you want longer-term coverage, consider other types of insurance or extended warranty protection.
4. Identity theft protection
A good identity theft protection service can help protect your credit by warning you if your personal data was leaked or if scammers have tried to access your credit file or open new accounts. The best identity theft protection platforms also offer one-click credit locks, social media monitoring, bank account monitoring, and identity theft insurance for all-around protection.
Example: During tax season, you’re notified by the IRS that someone has already used your SSN to file a tax return under your name. Upon calling your identity theft protection provider, you speak with a fraud recovery specialist who walks you through the steps of placing a credit freeze on your credit files, identifying and disputing any additional fraud, and setting up SSN monitoring to alert you about any further issues. Your provider’s insurance policy also covers the costs associated with recovering your identity.
Who needs identity theft protection? Is it worth paying for? Identity theft can ruin your credit — and unfortunately, it can happen to anyone. For most people — but especially those who’ve had their identity stolen before — identity theft protection with built-in online safety tools is a worthwhile investment.
5. Guaranteed Asset Protection (GAP)
Guaranteed asset protection (GAP) is a form of insurance that covers the difference (or “gap”) between what you owe on an auto loan and the actual market value of your car if it gets stolen or totaled. While your car insurance may cover the market value of your car, that amount decreases as soon as you drive it off the lot. If something bad happens, you’re left to pay off a significant loan balance.
Most car dealerships offer GAP insurance as part of the financing or leasing process. Banks and credit unions offer GAP insurance, as well. And they may give you a better rate if you’re already a customer.
Example: You purchase a new car for $40,000 but only put down $4,000. In the first nine months of using your car, you get into a serious accident, and your vehicle is totaled. By then, your car has depreciated to $30,000, which your car insurance will cover. GAP will pay the remaining $10,000.
Who needs GAP? Is it worth paying for? GAP might be worth paying for if you made a low down payment, your car is brand new, and you drive a lot. Just make a point to reassess and update your policy as your car diminishes in value.
Is Credit Protection Worth It? It Depends.
It can be confusing to know which of these services you actually need, or if the cost is worth the benefits.
Here’s a quick guide on when you should or shouldn’t use each service:
Whichever Credit Protection You Choose, Watch Out For Scams
Credit protection can be useful, but it really depends on your specific situation. Whichever service you choose, it’s important to do your due diligence and make sure you’re not falling for a scam. When researching credit protection tools, do the following:
- Confirm all plans and services directly with your card provider. Don’t trust emails, calls, or texts that offer plans. Instead, contact your credit card issuer directly and ask for specifics.
- Look for reputable credit monitoring services. Do a Google search of the company. If it’s a scam, you’ll see poor reviews on Trustpilot, the Better Business Bureau (BBB), and in the app store. Shady platforms also tend to obfuscate their pricing, make it hard to contact support, and lack a free trial or money-back guarantee.
- Ignore anyone who claims to be able to “fix” your credit score. No financial institution can legally remove accurate, negative information from your credit report [*]. To improve your credit, avoid opening new lines of credit, make your loan payments on time, and pay off your debt.
