You drop your new iPod in the bathtub. A pen explodes all over
the shirt you just bought. Or a thief swipes your designer
sunglasses right out of your shopping bag. Out of luck? Maybe not,
if you bought the item with a credit card that has purchase
Purchase protection is a type of insurance that is offered as a
benefit on some credit cards, according to Nessa Feddis, vice
president and senior counsel for the American Bankers Association.
She says: "It gives people peace of mind, especially for an
The pros of purchase protection
Consumers who use any credit card to buy an item that turns out to
be defective can complain to their credit card company and possibly
get their money back, with some restrictions, thanks to consumer
protections under federal law, says Linda Sherry, director of
national priorities for Consumer Action. She says, "That is
basically disputing a charge."
But what if a perfectly good purchase gets ruined or goes
missing due to clumsiness, theft or just plain bad luck? That's
where purchase protection comes in for consumers who bought the
item with a card that has the benefit, Feddis says. Purchase
protection is not to be confused with paid-for add-ons, such as
credit protection plans, which have proved lucrative to banks, but
have been of little use to consumers seeking payment relief when,
say, unemployment hits.
Purchase protection is one of the benefits that is more often
found on a higher-end card such as an American Express card, a Visa
Signature card or a World Elite MasterCard, Sherry says. "Some
cards have really rich benefits," Sherry says, noting that some
consumers don't know about or forget to take advantage of it. See
chart below to compare credit card purchase protection
It took a few minutes for personal finance blogger Crystal
Stemberger of Budgeting in the Fun Stuff to remember that she had
purchase protection on her Discover card after a thief grabbed her
new smartphone from her purse while she was donating blood. As soon
as she realized her loss might be covered, she called the company
and filed a claim. "It ended up working out pretty well. It
literally saved me $350," she says.
Purchase protection can be used in a variety of situations, but
what is covered varies by card and by the individual situation.
Examples of losses that might be covered by American Express,
depending on the case, include a bike getting stolen, a dog chewing
up a new pair of shoes or a camera falling into a swimming pool,
says Desiree Fish, vice president of public affairs and
communications for American Express. However, she says if that
camera fell into a lake or ocean and the cardholder couldn't fish
it back out, it might not be covered.
Fish says she used the benefit herself when one of her newly
purchased white gold-and-sapphire earrings fell out of her ear
while she was on her way to a restaurant. "I had to send the other
earring to American Express, to make sure there is no fraud I'm
sure, and they credited my account so I could go buy a new pair,"
Getting coverage through purchase protection typically involves
calling the card issuer, filling out a claim form and submitting it
with documentation of the loss, experts say.
"The paperwork required is like every other insurance plan --
there are hoops to jump through and papers to fax, Stemberger says.
"But overall, it was totally worth it, especially since it's a free
The catch: Case-by-case coverage
The bad news is that it's up to the credit card company to decide
whether your purchase protection claim gets approved. "It's on a
case-by-case basis," Fish says. The company reviews all the
circumstances and looks at the big picture, she says: "Just because
it's covered in one case does not mean it will necessarily be
covered in another case."
The details of coverage vary by card issuer but, according to
descriptions of benefits from several issuers, many exclude a long
list of specific types of items that range from animals to cars and
boats to food and other consumable items to all kinds of tickets.
So, if your new puppy gets sick, your Belgian chocolate melts or
your front-row Cirque du Soleil tickets are snatched from your back
pocket, you might be out of luck.
In addition to exclusions based on the type of item, many card
issuers say in their descriptions of benefits that they won't cover
items that are lost in certain ways. For example, many credit card
companies exclude things stolen from cars, left out in public out
of arm's reach, stolen from a gym or school due to carelessness or
taken out of luggage that was not with its owner.
Also, many issuers say they won't cover stuff lost in a plethora
of catastrophes, including: war, rebellion, insurrection, terrorist
acts, flood, earthquakes or via radioactive contamination. Oh, and
normal wear and tear.
So, it's important to check the coverage and exclusions for your
card before you need to use purchase protection, experts say.
"People need to know what a card covers," Sherry says.
Prepare -- before you need protection
If you have a card that offers purchase protection, here are some
tips on how to make the most of the benefit:
Learn your coverage amounts.
The per-incident dollar limit can vary widely by card -- in fact,
it could be anywhere from $500 to $10,000, depending on the card,
according to the fine print on the descriptions of benefits for a
variety of cards.
Remember to use your card for big purchases.
It's a good idea to use a card with purchase protection to buy
any valuable item that might get stolen or damaged, Sherry
If you have a loss, document it.
Credit card issuers typically ask for some kind of proof of the
loss. For example, photos of a broken item or a police report
(some cards require you to file one within 48 hours) if an item
is stolen. After a theft, Stemberger says, "The biggest
thing to remember is to file a police report, even if it is
a basic one over the phone."
Don't wait too long.
Call your company as soon as possible after a loss, Sherry says.
Some cards require that you report the loss within 30 days, and
many require you to submit the claim form and documentation
within 90 days.
If you're sure an item isn't covered, try
What if you break a pricy new bottle of French perfume, but the
paperwork that came with your card says consumable or perishable
items, including perfume, are not covered? Call anyway. "Always
call -- the worst you're going to find out is it's not covered,"
If you don't have purchase protection now, it might be worth
considering the next time you're shopping for a new credit card,
according to Sherry: "Even if you don't think you'll use it, it's
good to have."
6 types of purchases you should always charge on your credit card,
Purchase protection on balance transfers, Don't be caught off guard
by limited purchase protection