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: Credit Card 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 a 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 is 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 a piece of mind when you make your purchase.
