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Life Insurance & Credit Card FAQs: An Odd Couple

I was recently asked to share some of my thoughts on some common life insurance and credit card FAQs by MoneyGeek. Why these two topics in particular and why were they combined? I have no clue.

credit card FAQs
Thanks for having me MoneyGeek!

But I really enjoyed answering these life insurance and credit card FAQs. Because there is unfortunately a lot of misinformation and misconception out there.

Take me for example

At the end of my training 3 years ago, I had thousands of dollars of credit card debt and zero life insurance coverage. Despite the fact that I was married to Selenid and we already had two kids.

This is exactly the opposite from the way it should have been.

I should have spent a couple thousand dollars for term life insurance and have avoided credit card debt. (When able – I throw this caveat in because sometimes consumer debt is inevitable especially as a trainee for things like exam and board fees. There are options in these cases however.)

I still hear from really smart doctors who carry way too much credit card debt because of things like “points.” This is the wrong way for doctors to think about debt.

I also see doctors put of getting adequate life and disability insurance because of the price point – vent though they are high earners! This is not because they are negligent or something like that. It’s a sad result of the lack of financial education that physicians receive!

And you can find a complete guide to the insurance that doctors actually need here.

Related Post:
Financial Education Needs To Be Tied Into Medical Education

So, to tie a bow on this introduction, these are small but important and often overlooked topics.

Life Insurance & Credit Card FAQs

Let’s start with life insurance:

Life insurance FAQs

Full article here.

What factors affect the cost of life insurance? What does it mean to have cheap life insurance?

The biggest factors that affect the cost of life insurance are your age, your medical health and how much insurance you want.

Having cheap life insurance means that you have a policy that either pays out an insufficient amount of money or is severely restrictive with regards to when and how it will pay out.

What is the best strategy to find cheaper rates on a life insurance policy?

The best way to figure out the best insurer for life insurance is to work with an independent insurance broker.

This broker will be able to compare policies from multiple insurance providers using your specific health information to find the best coverage and price for you. By working only with a single insurance company directly, you limit yourself to only the insurance policies and prices that they have.

Related Post:
How Insurance Brokers Get Paid & Why It Matters 

Using an independent broker will make sure you get the best deal for you.

What types of life insurance policies are the cheapest? Why?

In general, the best life insurance is term life insurance. This type of life insurance lasts for a specific period or term (like 30 years). If you pass away during this period, the policy will pay out. If not, the policy expires. Fortunately, this type of life insurance is also generally the least expensive.

Whole life insurance is a combination insurance/investment product that you should generally avoid except in rare cases, usually for very high net worth individuals. The policy is very expensive and for most of the lifetime of the policy, the cash value of the policy is less than the premiums that you pay for it.

Put bluntly, you want term and not whole life insurance!

Ok, now let’s move on to credit cards…

Credit Card FAQs

For some reason, they wanted to focus on credit card cash advances. This is like doubling down on a bad idea – especially for doctors who have a high income.

If you are thinking about a credit card cash advance as a doctor – it’s probably really a poorly masked spending problem. If this is something you are struggling with, I recommend looking at these 3 posts:

And on to the FAQs from MoneyGeek…

Full article here.

What fees or limits do people have to worry about when using their credit cards to get cash advances?

When using credit cards for cash advances, there is usually a limit which is a percentage of your overall credit limit.

For instance, a 33% cash advance limit on a credit card with a $15,000 limit would allow one to take a cash advance of roughly $5,000. Credit card cash advances usually carry a 5% or higher fee upon withdrawal and have higher interest rates compared to the credit card itself.

When might penalty APRs apply on cash advances?

Penalty APRs will apply on cash advances when payments are late or returned. These can make it very challenging to pay off the card as interest payment becomes significant. Avoid penalty APRs by paying your card on time, even if it is the minimum amount.

But really, you should only use a credit card if you are planning to pay off the whole amount every month. This is what Selenid and I do if we use one. It’s also the only scenario in which credit card points can actually be to your advantage.

What are some options a person could take to avoid using a cash advance on a credit card?

Basically anything is better.

Some other options for a person to avoid using a cash advance on a credit card include using a cash out refinance or home equity line of credit to access equity in their primary home. One could also open new credit cards. While these are viable options, they are generally not recommended if they can be avoided at all.

Debt should be minimized as much as possible. If the cash advance is needed for an emergency such as a medical emergency, often payment plans can be negotiated with the debtor.

In general, doctors especially will always have lower interest rate loan options – like these – available for emergencies.

Concluding thoughts

So much of wealth building is about avoiding mistakes rather than even maximizing opportunities. Don’t get me wrong, if you do both that is great! But avoiding mistakes is priority #1. And while you can always come back from any mistake (trust me, I have made plenty of financial mistakes), avoiding them is a nice plus.

While randomly brought together, optimizing your life insurance and using (or not using) credit cards the right way is very important to your long term wealth building.

I hope these FAQs help!

And, spending of mistakes, before we end, here are 5 Interesting (and Scary) Financial Facts!

What do you think? How do you use credit cards? Do you have life insurance? If so, what kind? Let me know in the comments below?

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

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