May
15
I’ve seen many personal finance blogs and books rail against the evils of credit cards. Dave Ramsey, for example, has a very negative view of credit cards. I’ve always been in the “credit cards are good” camp, if you use them wisely. However, there’s a very good reason NOT to pay cash for big-ticket electronics: purchase protection. My friend used his credit card to buy a new Apple laptop and is very thankful he did.
His Purchase Protection Story
One morning about a month after buying the laptop, he pulled it out of the case and turned it on. Rather than the flawless screen he was expecting, there was a giant splotch at the top of the screen. It looked a lot like an inkblot. The rest of the screen still worked and there was no damage to the outside, but that part of the screen was unusable.
He took it to Apple, which refused to cover the repair under the warranty. They insisted it was damage, not a defect. They advised him to call his credit card company.
So he did. He got a repair estimate and filed a claim with Mastercard under their Purchase Assurance plan. Two weeks later he got a check to cover the repair. The repair cost was half the price of the laptop! Unfortunately, the estimate didn’t include tax, so he’s filed a second claim for the $50 in tax.
How Credit Card Purchase Protection Works
The exact protection you receive varies by issuer. Check your issuer’s website for limits, but usually purchase protection and purchase assurance cover up to $1,000 for fire, theft, or damage within the first 90 days. Some will also cover it if you simply lose the item. If you use a business credit card, coverage limits are typically higher.
In addition to covering fire, theft, or damage for 90 days, many cards also double your warranty.
To file a claim, you’ll need a receipt for the original purchase. If the item was stolen, you’ll probably need a loss report or police report. If you need a repair, you’ll also need to include a repair estimate. Contact your card issuer for instructions on filing a claim.
Once your claim is approved, you’ll receive a check in the mail for the amount covered.
Most Mastercards include coverage. Visa offers Purchase Security coverage, but only on certain cards. American Express coverage is equivalent to Mastercard protection on most cards, and some cards offer even greater protection.
What Should You Buy with a Credit Card?
If you’re planning to buy high-end electronics or small electronics that are easily lost or stolen, I would recommend buying it with a credit card. This is especially true of anything with a plasma or LCD screen, which are notoriously expensive to fix. When you use a card that offers an extended warranty benefit, you can skip the overpriced warranty offered by the store a.
Here are some items I would buy with a credit card to because of purchase protection and extended warranty coverage:
- Video camera
- Digital camera
- MP3 player
- Cell phone
- Laptop
- Desktop computer
- LCD monitor
- LCD TV
- Plasma TV
- Projection TV
Obviously, it’s best to use a card you pay off every month. If you add the purchase to one that already has a balance, you could end up paying more in interest than you receive in benefits.
If you’re planning on a big-ticket electronics purchase, review the protection plans offered by your cards. Choose the best coverage on the card without a balance so you can also buy piece of mind when you make your purchase.
Apr
2
Get Your Share of the Foreign Transaction Fee Settlement
Filed Under Credit Cards, Financial News | 1 Comment
Late last year, I received a notice from Visa informing that I was eligible to receive funds from their foreign transaction fee settlement. MasterCard and Diner’s Club were also part of the settlement. If you haven’t applied, or don’t know about it, here’s what you need to know.
Foreign Transaction Fee Lawsuit Background
The suit argues that Visa, MasterCard, and Diner’s Club (together with several issuing banks) colluded to set and conceal foreign transaction fees on credit card purchases. It also argues that they inflated the exchange rate on those transactions. The suit applies to the period between February 1, 1996 and November 1, 2006.
Although they deny wrongdoing, the banks and issuers have agreed to a settlement, which means you’re entitled to receive settlement funds if you used an eligible credit card in a foreign country during that period.
How to Apply for Settlement Funds
The application process is very simple. Just go to the Credit Card Conversion Fee Settlement website, and click the “Submit Your Claim” button. If you have your refund ID, enter it there. If not, click the tiny “I do not have a Refund ID” link to continue.
You have three settlement options:
Refund Option 1: An Easy Refund of $25. This is best for people with less than one week of travel, or total transactions of less than $2,500 between 1996 and 2006.
Refund Option 2: A Total Estimation Refund. This is based on your typical spending habits during travel. Use this if you traveled for more than a week, or spent more than $2500, but don’t have complete records to back up your claim. The refund will be a maximum of 1% of your estimated foreign transactions.
Refund Option 3: An Annual Estimated Refund. If you have records and traveled extensively, or used a company card, then use this option. You have to provide a year-by-year spending estimate, but your refund will be a maximum of 1% to 3% of foreign transactions.
My husband and I only had one trip during that period. We checked our records and found that our charges were less than $2500, so we opted for the simple $25 reimbursement. My parents travel extensively, and have their documentation, so they used option three. My sister lived abroad for a few months, so she also used option 3.
If you think you’re eligible, apply now. It’s free money and applying doesn’t take a lot of effort. The deadline to apply is May 30, 2008.
Dec
28
Save Money on Holiday Credit Card Interest
Filed Under Credit Cards, Debt, Expenses, Holiday | Leave a Comment
If you were counting on a holiday bonus or tax refund to pay off your holiday charges, you may not be able to. According to Hewitt Associates, 63% of companies surveyed don’t plan to give holiday bonuses this year. Due to the credit crunch, many businesses that previously offered bonuses have had to forgo them or scale them back. There’s a silver lining - many companies are switching to performance-based bonuses during the year - but that won’t help you now. To add to the burden, tax refunds may be delayed by up to seven weeks because of the late passage of the alternative minimum tax patch.
So, rather than that January or February payment you planned on making, it could have to wait until March. That means you’ll be racking up credit card interest on your holiday purchases for three months. Depending on your APR, that could total an additional $50 or more that you hadn’t budgeted for.
If you face this situation, use the first three tips to reduce the interest costs this year, and then use the second three tips to avoid interest next year.
Three Interest Rate Reduction Tips
Ask for an interest rate reduction. If you have a good record of on-time payments, call your credit card issuer and ask them to reduce your interest rate. If you have a balance transfer offer in hand, tell them that. They may be willing to match the offer.
Do a balance transfer. Search for a card with 0% interest and no balance transfer fees. Even if the offer is only good for six months, that should be long enough to get your refund and pay off the bills, or to cut expenses in other areas so you can pay the holiday bills. You may also receive offers from credit cards you already have. If so, then using one of those instead of adding a new card to your credit report might be a better option.
Take a loan from your emergency fund. Normally I don’t recommend raiding your emergency fund for expenses like this, but this year, you may want to borrow the money for now and then replenish the fund when your refund comes.
Three Tips for Avoiding Interest Next Year
Change your withholding. If you get a tax refund every year, then you’re having too much withheld from your paycheck. There’s no reason to give Uncle Sam an interest-free loan. Instead, use the withholding calculator at IRS.gov to determine how much you really need to withhold, and then file a new W-4 with your employer.
Create a Christmas account. A few decades ago, employers and banks let people create Christmas savings accounts. Most of those have been discontinued, but you can create one on your own. The easiest way is to set up an account at an online bank. Rather than spending the increased amount you received from reducing your withholding, deposit it in the savings account. You may also wish to deposit performance-based bonuses into the account. Then you can use that money to pay cash for Christmas and holiday expenses or to pay your credit card bills as soon as you receive them.
Set a budget and stick to it. Overspending is one of the reasons many people have to pay credit card interest on holiday expenses. Next year, set a budget for your holiday expenses, create a Christmas shopping list, and stick to it.
