People often make the mistake of thinking that if they do not have a mortgage or any large loans, they will not have Payment Protection Insurance and so cannot make a claim. However, this is not necessarily true as many people pay a monthly premium for PPI which is attached to their credit cards without even knowing it.
This is because Payment Protection Insurance is often sold alongside the credit product which it is meant to cover. In the case of credit card PPI, it was not uncommon for the PPI sale agreement to be little more than a box on the credit card application which the consumer was asked to tick if he wanted to “protect” his credit card.
Credit card Payment Protection Insurance is meant to cover the payments on the credit card debt in the event that the cardholder becomes ill, suffers an accident or loses his job, and so cannot work. However, many agreements only cover the minimum repayment each month, rather than the full credit balance and consumers are often not aware of this when they purchase the policy, nor are they told that they could probably buy much cheaper Payment Protection Insurance elsewhere. In these circumstances, cardholders may have a valid mis-selling claim.
How Do Credit Card PPI Claims Work?
Whilst the monthly premiums for credit card PPI are much lower than those which are paid on other types of debt, a consumer who is paying for PPI on several credit cards can potentially have claims for a substantial amount of money. For example, someone who has had three credit cards for the past 4 years and who is paying £15 per month on each of these will have claims totalling £2,160.
The way that this works is that average PPI amount on a credit card was usually 1%. So for every £100 monthly balance you have, £1 will be PPI. Using the example above, lets break it into 2 parts.
Part 1 – Working out the PPI Claim for 1 Credit Card
Lets assume the balance is £1000 on each credit card, meaning the PPI amount payable every month is £10 (1%). Over the course of 4 years, the amount is £480 PPI (£10 x 12). This is assuming paying off the minimum payment which covers mostly the interest so that actual balance doesn’t really decrease quickly. On top of the PPI paid, there is 8% per year statutory compensation on the PPI. This is £480 x 8% = £38.40 x 4 (years) = £153.60. Add this statutory interest to the PPI amount of £480 and the total is £633.60.
Part 2 – Adding all the 3 Credit Card PPI Claims Together
We have already worked out the PPI for 1 Credit Card, so we now simply multiply this figure by 3 to get the total PPI owed. £633.60 x 3 = £1900.80. This is a general way of working out, however please note that there are a lot of variables to take into account such as the monthly balance falling slightly as the minimum payment does clear some of the balance off every month meaning that some PPI amounts decrease over time meaning that the statutory 8% will decrease as the PPI amounts decrease.