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Purchase Health Insurance with Credit Cards
Health insurance is critical for everyone. Unlike earlier times when you had to make cash or cheque payment for your health insurance, nowadays, insurance companies accept credit card payments towards health insurance premiums. In fact, with the widespread use of plastic money, this form of payment is becoming more and more popular. But how sensible is it to purchase your health insurance through a credit card? What are the benefits and drawbacks?
Why should you do it?
The biggest advantage while making your premium payment through credit cards is that your bank balance will not go down immediately. That is, you can delay the outflow of cash from your account. You can also earn points on your credit card for this expense. If you have taken a substantial health cover, then your premiums also will be high. This means that you can earn higher number of reward points for your purchase. But should you opt for a credit card payment simply because you can delay the cash outflow and earn points? It can be quite disastrous if you are not careful with your credit card. Here's what can go wrong when you pay through credit cards.
Things you should take care of:
Auto-mode: First, you will need to ensure that the payment is not in the 'auto-pay' mode. That is, most insurance companies ask you if you wish to automate your health premium payments every year and if you choose 'yes', then the amount is deducted from your credit card account every year. Although this looks like a good way to avoid missing deadlines, it is better not to opt for this. If you are unhappy with the health insurer's services, you can port your policy to another insurer. Automating premium payments through credit cards can make the process complicated if you want to shift your health provider. Also, sometimes, premiums are increased without informing the policy holder and this increased amount is debited from your credit card account. Sharing your credit card details with the insurer and authorising a third party to debit your credit card account is not advisable under any circumstance. Hence, this should be avoided.
Additional Charges: Next, when you make your purchase through the credit card, you will be charged an extra fee over and above your premium amount. This may either be a percentage of your premium amount or a flat fee. The amount of fee charged varies from one service provider to another. Nevertheless, all credit card payments entail a transaction fee. This is because the health insurance company will in turn have to pay the credit card company. This extra fee you pay may look like a small amount. But why pay extra when you can opt for other payment methods which do not carry any extra fee?
Missing deadlines: Third, as in the case of any other credit card payment, if you do not pay your credit card dues on time, you will end up paying a hefty interest rate. In addition to this, you will be charged a late payment fee as well. The amount you end up paying extra will be much more than what you think you are saving by opting for this payment mode.
If you think you will not be able to pay the premium amount on your credit card in one lump sum and want to opt for an Equated Monthly Instalment (EMI) payment on the card, then think twice. Such EMI schemes have an inbuilt component of interest, and you may end up paying much more than your premium amount. This should also be avoided.
Thus the verdicts of whether or not you should purchase health insurance through credit cards depend on how financially disciplined you are. If you are careful in how you use your card and are prompt in your payments, you can use your credit card for your health insurance. Otherwise, it is better to stick to conventional payment systems like cash or cheque.
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