Credit Cards

How To Use Credit Cards To Protect Your Purchases

When you charge a purchase to a credit card, you potentially unlock a number of protections. If your item is damaged, stolen, or defective there’s a number of different things you can do to recoup your money.

A chief benefit that comes with using credit cards for purchases is the plethora of safeguards and protections built into them. If something went wrong with a big purchase you put onto a credit card, there’s a number of options you can tap into to try and remedy the situation. While most cardholders have access to these, few know about them. By familiarizing yourself with these perks, you can save yourself a decent amount of money.

All the benefits listed here come with a number of caveats. For example, price and purchase protections tend to only cover transactions for 90 days. If you’re thinking of using one of the perks we outline here, take the time to familiarize yourself with their terms and conditions first.

Purchase Protection. If you bought something that was then either accidentally damaged or stolen, most credit cards can give you a refund. Typically, the only requirement is that you charged the full price of the item to the credit card. The largest U.S. banks have online claim systems set up to let you request the refund. If you can’t find it, you can simply call-up your issuer and ask about purchase protection.

Very expensive items might not qualify for a full refund. Depending on your issuer, the maximum payout per claim can be anywhere between $500 and $1,000. There are also limits on the total payout you can receive within one year, though you’d have to be very unlucky to get near it. For American Express, for example, you’d have to file 50 claims within one year, at $1,000 each.

Most purchase protection programs will not cover you if you simply lose an item. If you claim the item was stolen, you may be required to submit a police report. If you simply suspect an item might have been stolen, an issuer will not pay for damages. In their policies, Wells Fargo goes as far as point out that “mysterious or unexplained disappearances” are not covered.

Extended Warranty Protection. Few things can be as frustrating as an item breaking shortly after the manufacturer warranty has expired. If you paid for the item with a credit card, there’s a chance the issuer can still compensate you for the loss. Most credit cards that come with purchase protection also have an extended warranty benefit bundled with it.

Depending on what credit card you have, your warranty might be extended by one to two years. Just like with purchase protection, there are limits involved. The good news is that warranty coverage tends to come with significantly higher claim limits. A single item can generally receive $10,000 in coverage.

Price Protection. Many credit cards will also protect you in the event an item goes on sale after you buy it. Select Mastercard and VISA credit cards come with this benefit. The coverage can extend anywhere between 60 and 90 days after your original transaction. If you have a card on the World Elite Mastercard network, this is extended to 120 days.

The tricky thing about price protection is that you have to report the price yourself. Therefore, unless you scan the web and stores for better prices, you are unlikely to receive a refund. If you do find the item you bought at a lower price, make note of where the offer appears and call the claims department of your credit card issuer or network.

Price Rewind, Citibank’s price protection program, claims close to $2M was refunded to consumers in Q1 2016, with the average kickback being $27.89.

Fair Credit Billing Act. If you use a credit card to make a purchase, you are given the power to have that purchase withdrawn for a number of reasons. The Fair Credit Billing Act of 1974 allows cardholders to dispute things on their bill they consider to be an error or mistake.

For example, if you were double billed for an item, you can notify your issuer and have the charge removed. This benefit can go beyond simple mistakes. If you order an item online, and receive the wrong order or a defective item, you can also have it taken off the bill. You are, of course, expected to try and work things out with the merchant involved. However, if you paid for the item with a debit card, you would be down the money it cost, until the merchant decides to issue the refund. With a credit card, the money is in your court.

Joe Resendiz

Joe Resendiz is a former investment banking analyst for Goldman Sachs, where he covered public sector and infrastructure financing. During his time on Wall Street, Joe worked closely with the debt capital markets team, which allowed him to gain unique insights into the credit market. Joe is currently a research analyst who covers credit cards and the payments industry. He earned a bachelor’s degree from the University of Texas at Austin, where he majored in finance.

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How We Calculate Rewards: ValuePenguin calculates the value of rewards by estimating the dollar value of any points, miles or bonuses earned using the card less any associated annual fees. These estimates here are ValuePenguin's alone, not those of the card issuer, and have not been reviewed, approved or otherwise endorsed by the credit card issuer.

Example of how we calculate the rewards rates: When redeemed for travel through Ultimate Rewards, Chase Sapphire Preferred points are worth $0.0125 each. The card awards 2 points on travel and dining and 1 point on everything else. Therefore, we say the card has a 2.5% rewards rate on dining and travel (2 x $0.0125) and a 1.25% rewards rate on everything else (1 x $0.0125).