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24 Jan 2012

Card protection - money products to avoid

It's not worth paying for a card protection policy

Consumers already have protection against card mis-use

Nobody wants to pay for things they don't need. This applies to financial products just as much as home, technology and kitchen gadgets.

Everyday this week, we'll be analysing the products which we believe offer bad value for consumers, starting yesterday with mobile phone insurance and following on today with card protection, outlining why we've launched a new campaign to ensure that consumers are protected from poor products in the future.

Card protection is a needless expense

Card protection is a form of insurance sold by banks and other card providers. It's designed to protect you from financial loss if your debit or credit cards are lost or stolen. A third (32%) of Which? members we asked said they have card protection policy. It typically costs around £37 a year.

The big flaw with these card protection policies is that while they say they cover against financial loss if you're a victim of fraud, this is protection that all cardholders already have. Under the rules laid down in the Payment Services Directive, banks must refund you immediately if you are a fraud victim, unless they have reasonable doubt that you have acted negligently or fraudulently.

The most that any bank can leave you liable for is £50, but in most cases this excess is not applied. Even where it may not be, given the initial outlay of around £37, that just £13 you could be liable for.

Card protection providers don't explain your rights

When we analysed the marketing material for various card protection policies, we found that none explained the Directive's requirements.

The only other 'benefits' you get are a number to call if you lose your wallet and some small benefits like handbag insurance that you're likely to be covered for elsewhere, or a 24-hour call line.

Which? verdict on card protection

We believe companies that sell card protection policies by emphasising a benefit that is a legal right could be misleading customers. There are additional benefits on offer, but they are often unnecessary, unless you're someone who places a high value on being able to cancel all your cards at once or don't have adequate cover under your home or travel insurance.

Watchdog not lapdog campaign

We believe that the financial regulator should be responsible for putting a stop to poor-quality financial products, which is why we're launching our new 'Watchdog not Lapdog' campaign.

At the start of next year, the current regulator, the Financial Services Authority (FSA), will split into two new authorities:

  • The Financial Conduct Authority (FCA), which will have responsibility for protecting consumers
  • The Prudential Regulation Authority (PRA), which will focus on maintaining financial stability

We want to ensure that the FCA puts consumer protection at the heart of everything it does - and make sure it becomes a watchdog that keeps the financial services industry in check, not a lapdog that panders to it.

More on this...

  • The Which? Money Helpline - we'll help if you have any queries about financial products and services
  • The Watchdog not Lapdog campaign - we explain what our new campaign is trying to achieve
  • Support our campaign - sign up to the Watchdog not Lapdog campaign to call for greater consumer protection