Would You Like an Extended Warranty?

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Talk about being put on the spot.  Whether you are at Best Buy purchasing a new 60 inch TV or at Lowe’s to purchase a new washer and dryer it is a sure guarantee you will be asked to buy an extended warranty or some form of purchase protection plan.
 
Is it worth it?
 
Usually not – here’s why.
 
You may already have coverage if you purchased the item using your credit card.  According to a CreditCards.com survey of 100 credit cards 81 of the cards had an extended warranty benefit on purchases. You can click here to see if your card makes the list.
 
Typically the extended warranty benefit on your credit card will lengthen the original manufacturer’s repair warranty.  The extension can usually range anywhere from 2 to 5 years of additional coverage.  Keep in mind, depending on the size of the purchase, the credit card company will often limit the amount per claim, usually $10,000, with a limit of $50,000 in total claims per year.   Unless you are purchasing a $10,000+ TV or washer and dryer this coverage usually will suffice, and it’s FREE.
 
If your credit card does not offer an extended warranty protection benefit you may want to consider opening a credit card that does if you are considering making any large purchases. 
 
However, if you do end up buying the extended warranty at the register just make sure to read the fine print as often times there will be deductibles and exclusions. The warranty is also usually administered by a third party.  If that third party happens to go out of business, then your extended warranty is essentially useless as there is no place for you to file a claim.
 
In addition to extended warranty benefits on your credit card there are also three other purchase benefits you should be aware of – Purchase Security, Price Protection, and Return Protection.
 
Purchase Security is a benefit that can replace, repair or reimburse you for stolen, lost or damaged items purchased with your card.  If the item is eligible make sure to file your claim on time, typically within the first 90 days after the incident occurred.  Claim limits on this benefit can range from $500 to $10,000 with a total annual claim limit of $50,000 depending on the card
 
Price Protection is a perk that allows you to file a claim if you find the item you purchased at a cheaper price.  For example, if you purchase a TV for $1,000 and you find it two weeks later on sale for $850 you can submit a claim and the credit card company will reimburse you the $150 price savings.  You typically have between 60 to 120 days from the initial purchase date to file a claim.  Claim limits on this benefit can range from $250 to $500 and are often capped at $1,000 to $2,500 in total claims per year.
 
Return Protection essentially expands the merchant’s existing refund policy.  If you cannot return your item and get a refund from a store, the credit card company may step in and provide one for you.  In order to use this benefit, you must typically file a claim within 90 days of the initial date of purchase.  Most credit cards limit refund claims from $300 to $500 per claim with annual cap of about $1,000.
 
If you are interested in learning more about finding the right credit card for you, whether you’re looking to maximize rewards or attain the strongest purchase protection benefits, please contact your advisor.