Why is it that expensive products work like a charm -- until
approximately three hours after the manufacturer's warranty runs
out? Good news: If you paid with a credit card, you may not have to
pony up for a replacement.
All four major card payment networks -- Visa, MasterCard,
Discover and American Express -- offer similar extended warranties
for products purchased with their cards adding up to an extra year
to the warranty that came with the item.
Though most cards offer warranty protection in some form, you'll
have to meet a laundry list of requirements to qualify. If you do,
you'll get your broken toaster, cellphone or fridge in good shape,
without breaking your own bank account.
How to file a claim
When a product you purchased in the past year bites the dust,
contact your card's warranty processing center within the allotted
time to find out if they can help. (See "
Compare credit card extended warranties
" table below for details.) Then prepare yourself for a few
For starters, your issuer will need to make sure your product is
covered. Among the possible exclusions: refurbished or secondhand
items, software, cars, boats and any product you're planning to
hard-wire into your house, such as ceiling fans or doorbells.
You'll also have to supply a hefty volume of documentation,
including your original receipt, the relevant credit card statement
and a copy of the manufacturer's warranty. Your card won't cover
any kind of damage that your original warranty didn't, and it'll
pile on a few of its own exclusions as well, including, for the
most part, normal wear and tear, power surges, accidental damage
and catastrophes like floods.
If your broken item does qualify for extended warranty coverage,
your credit card company will decide whether to repair it, replace
it or reimburse you for it. You may be asked to mail in your
damaged item and forced to survive without it for weeks.
On the upside, you're not paying for it. Extended warranty
coverage is a free perk for card members, so if your product
malfunction happens to fall in the sweet spot -- a covered item
with a covered problem that occurs within 12 months from the
expiration of the original or purchased warranty -- you could save
a bundle of cash. Most purchases, including biggies such as
appliances, are covered up to a replacement value of $10,000.
Credit card extended warranties provide an alternative to the
often-criticized, but very popular, extended service contracts and
warranties sold through retailers. Like credit card warranties,
they have severe restrictions on what they cover. Unlike a card's
warranty, they aren't free, costing an average of 10 percent to 50
percent of the items' original prices.
Selling extended warranties became a multibillion-dollar profit
center for retailers -- especially those selling electronic
equipment -- beginning in the 1980s. According to a 2009
Carnegie Mellon study
of retail buyers' behavior, consumers felt reassured by the
warranties when they bought unfamiliar products. This reassurance
was particularly valued for products bought for enjoyment, not
utility. And 49 percent of early adopters make sure their brand-new
gadgets are covered by a protection plan, says a 2012
study by Assurant Solutions
, an extended warranty provider.
The value of an extended warranty depends a lot on the
likelihood that the product will break during the covered period.
According to Consumer Reports, the failure rate for television
equipment is only 9 percent in the first three years, compared to
26 percent for phone equipment. Consumer Reports says that with a
extended warranties aren't worth the money
If you decide to go for an extra warranty, what you're offered at
the cash register is not your only choice. "I think a lot of people
are under the impression that if I buy something at Best Buy, I
have to buy a Best Buy warranty or nothing," says William
Duckworth, a professor of business intelligence and analytics at
Creighton University. Sure, you
buy the store's warranty, but you can also purchase an extended
protection plan straight from your product's manufacturer (think
AppleCare for Apple products) or from a growing selection of
third-party companies that sell warranties directly to consumers,
such as SquareTrade and Protect Your Bubble.
Of course, all that choice can make it tougher to figure out
what you need.
Consider these four factors:
. Search for online customer ratings and reviews, just as you
would with any other purchase. "If you're going to pay for an
extended warranty, you want to be able to trust the company
you're dealing with," says Ty Shay, chief marketing officer for
San Francisco-based SquareTrade, which prides itself on its high
customer satisfaction ratings and, as Duckworth points out, if
someone's disgruntled with the service, that'll be online,
. Loopholes are the enemy, so check for complete coverage for the
problems you're likely to have: loss, theft, accidental damage,
mechanical breakdown, power surge damage, dropping your tablet in
the toilet again.
. Check into how claims are filed -- online or by phone -- and
how quickly you'll get a replacement product. Ask whether you'll
be on the hook for shipping costs; you shouldn't be. And consider
whether you might benefit from other kinds of help. Assurant
Solutions, the company behind point-of-purchase warranties at
stores including Staples and Radio Shack, provides over-the-phone
tech support when a product goes haywire. "Before you ship it
somewhere, you want to be able to talk to somebody who can help
you understand whether [the problem] is just user error," points
out Joe Erdeman, president of Assurant Solutions' extended
service contract business.
. The cost of a warranty can vary widely depending on what you're
insuring and the level of coverage you need. Prices range from a
few dollars to hundreds, so comparison shop before you buy.
If a warranty costs "under 10 percent to 15 percent of
the purchase price [of your product], you're probably getting a
pretty good deal," says Duckworth, who developed the
app to help consumers decide whether a warranty is a smart
Ask about deductibles, too. Not all warranty programs have
them, but better coverage sometimes means paying big bucks
In a time when 24-7 access to devices and appliances doesn't
feel optional -- and when replacing them is so pricey -- a good
warranty can be a lifesaver. Just be sure to do your homework
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