Purchase protection benefits: What they are, how to use them

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One good but little-known reason to wield your credit card when making purchases is to take advantage of purchase protection.

Putting a purchase on the right piece of plastic may help you have it replaced if what you buy is damaged or stolen, get a refund for an unsatisfactory product or service, or even extend the manufacturer’s warranty without paying a dime for the added protection.

“People should know what’s on their cards and the benefits available, and they should use them,” says Linda Sherry, director of national priorities for nonprofit Consumer Action. “Those protections are part of what you’re paying for, so don’t let them go unused.”

Here’s everything you need to know about purchase protection benefits and whether your favorite credit cards offer them.

Purchase protection benefits offered by credit cards

*Visa Inifinite is a high-end benefits program featured in some luxury cards. Examples of Visa Infinite cards include Chase Sapphire Reserve, U.S. Bank Altitude Reserve and The Ritz-Carlton Rewards.  

Basic protection is covered by law

The first and most basic layer of protection on your purchases comes from the federal Fair Credit Billing Act, which protects you in a dispute over the goods or services you’ve purchased.

These protections are available when you use any credit card to make a purchase – even if the card issuer doesn’t offer additional coverage.

How it works: Say the Xbox your kids received for Christmas is defective. Generally, any merchant is going to exchange or return that item. However, if there’s a problem, you can request a chargeback from your card issuer so you don’t have to pay for the faulty present.

The fine print: Under those federal rules,

• You first have to try and work out the dispute with the merchant.
• The purchase was more than $50 and it was made in your home state or within 100 miles of your home.
• Phone, online and mail purchases can still be covered, but it’ll depend on your state or other applicable laws.

Beyond that basic coverage is where you’ll see individual card benefits kick in. These perks may include extended warranty, purchase security and return protection.

Be aware that just because a benefit existed when you first signed up for a card, the terms, limits and benefits can change over time.

Extended warranty

This benefit adds to the original manufacturer’s warranty when eligible items are purchased using your card.

• The fine print: The length of the added coverage can extend from a year to two years, and some coverage only applies to warranties of 12 months or less. The limit on each claim typically is $10,000 with a $50,000 annual cap on the entire account.
• Cards that offer it: Visa, Mastercard, American Express, Citi, Capital One, Chase.

Citi is the hands-down winner, adding 24 months onto any manufacturer’s or extended warranty up to seven years from the purchase date, up to $10,000 or the amount originally charged.

“That’s amazing,” says Edgar Dworsky, founder of the consumer resource guide ConsumerWorld.org. “Most cards say they’ll double the manufacturer’s warranty, up to an additional year.”

Purchase security

This benefit, also known as purchase protection, covers damaged, lost or stolen items purchased on the specific card, but with several limits, and will replace, repair or reimburse you for the lost or damaged item. The claim period typically is 90 days after the purchase, but that can vary from card to card. Coverage may be capped at anywhere from $500 to $50,000, along with an annual cap.

• The fine print: You’ll need receipts and usually a police report for a stolen item, a repair estimate or picture of a damaged item and you’ll likely have to hang on to anything damaged. Coverage is secondary to homeowners or auto insurance, and some policies exclude items stolen from vehicles.
• Cards that offer it: Visa Infinite, Mastercard, American Express, Citi, Chase. Some Chase cards, for example, offer up to 120 days over coverage up to a whopping $10,000 per item.

Despite the paperwork hassles of filing a claim, it works. Sherry recalls one friend whose recently purchased coat disappeared from a party. “It was a brand-new overcoat bought with an American Express card, and he got a new one,” she says.

Return protection

While much less common than extended warranty and purchase security perks, this benefit extends the retailer’s refund policy, allowing you to claim a refund when the seller won’t return your money. In most cases, you’ve got 60 to 90 days to file. The most common limits are up to $300 on each refund and an annual limit of $1,000 per account.

• The fine print: Usually it doesn’t cover damaged or defective items, as well as plants, shrubs, animals, pets, food and perishables and any kind of stored data or music, including software, tickets or anything permanently installed.
• Cards that offer it: Visa Infinite, Mastercard, American Express, Citi, Chase.

Benefits come with limits, too

• Not everything will be covered: This is insurance, so there are exclusions, naturally. Anything perishable, used or collectible generally is going to be out, but check your specific card.
• Examples of purchases that might not be covered include: personal services like a car repair, perishable products, event tickets, gift cards, jewelry, antiques, software, pets, DVDs, damage caused by power surges and articles subject to wear and tear in normal use.
• Examples of purchases typically covered include: clothing, electronics, accessories and other common holiday gifts.

What you need to know to make these benefits work

• Time is of the essence. Both purchase security and return protection come with limits, usually 90 days but 120 days under the most generous offers, so you’ll need to act quickly.
• There also are limits on how much you can collect. Coverage for purchase security can be limited per claim, even with the most generous cards. So, for example, an expensive stolen engagement ring might not be completely replaced.
• Lost or stolen? You’ll have to prove it. Most cards won’t reimburse you for something that “just goes missing” without a clear indication of loss or theft. You’ll need a police report, itemized store receipt and copies of insurance coverage and any claims you file.

Every card is different

• Not every card offers coverage. Benefits vary not only from network to network, but within cards. Extended warranty coverage, for instance, might be all that’s on a basic card with more and better deals on more elite cards.
• Review your card’s term and conditions to learn more about stipulations, paperwork requirements and further coverage and benefit details. Pay particular attention to how to file a claim – there’s a time limit and paperwork requirements, such as an original receipt.
• When in doubt, call. If you didn’t keep your original statement of terms or can’t find it online, call customer service at the phone number on the back of your card. “Just call and flat-out ask,” says Beverly Harzog, credit card expert and author of “The Debt Escape Plan.” As a customer, “you’re certainly entitled to find out what your benefits are.”

 Cards’ best-kept secret? Extended warranties

“You don’t have to buy an extended warranty,” says Dworsky of ConsumerWorld.org. “If you’re buying an item with a one-year warranty, it can be magical. You can get three years just by putting it on the right card.”

Think of it, he adds. “You could be making a critical mistake or a brilliant move, depending on which card you pull out of your wallet.”

Extended warranties also come with a few catches

Limitations on extended warranties include:

• Requirements that the items be new, not used or floor models, and that the item comes with an original manufacturer’s warranty of no more than 12 months.
• Most extended warranties also won’t cover anything that’s excluded from the manufacturer’s warranty.

Do you know what benefits are offered by your card?

Chances are, no.

“Part of the problem is that people don’t even know that these things exist,” says Harzog. “How many people get their packet of credit card terms and think, \u2018I can’t wait to read all of this!’ In many cases, the benefits aren’t as transparent as they should be. Otherwise, people would be using these benefits a lot because they can really help them out.”

See related:Holiday guide of credit card tips, 3 tips for using credit card price protection