What is Purchase Protection on Credit Cards?

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You can bet that a card issuer will tout a generous sign-up bonus or a fabulous rewards program. But credit cards often have other nice perks that aren't promoted to consumers. For instance, you might not even know about purchase protection on credit cards.

Not all cards have it, of course. But if you do have a credit card that offers purchase protection, it's something you should keep in mind just in case there's an opportunity to use it. It might even put money back in your wallet, which is always a good thing.

Let's take a close look at how purchase protection on credit cards works. Remember, though, that the specifics will vary by issuer.

What is Purchase Protection?

You're walking along a busy sidewalk and you're glancing at email. Suddenly, someone bumps into you and you drop your phone on the sidewalk. The screen is shattered. Or maybe you left your phone on the table in the restaurant. Five minutes later, you remember and run back to the table. But it's too late. A watchful thief has already absconded with your new phone.

Believe it or not, purchase protection might help you with either dilemma. Purchase protection is kind of like insurance, which is nice to have if you're making an expensive purchase and then you have a really bad day.

To have protection, you have to use your credit card when you make the purchase for coverage to kick in. You can't buy a new camera with your debit card and then try to use the coverage you would've gotten on your American Express credit card. If you use your credit card and it has purchase protection, you're in luck. Note: Some issuers allow for some coverage if you've used your card for at least part of the purchase. So if this applies to you, call the issuer and see what they can do for you.

In general, the coverage usually lasts for the first 90 days after your purchase. And you should file a claim within 30 days of the loss (or the day the item was damaged). Is there a cost? No, purchase protection on credit cards is offered as a free benefit to cardholders. You can find out if your card offers it by reading the disclosure statements for your credit card.

There's usually a benefits guide that explains all the perks offered by your card. If you can't find the information, call your issuer and ask. You can also request to have a guide mailed to you. In many cases, the benefits package is online and the customer service rep might be able to direct you to a link.

Are There Any Limits on the Coverage?

Yes, each card will have a limit and it's usually stated as a "per incident" limit and as an annual limit. For instance, coverage might be limited to $1,000 per item, or "incident" as it's often referred to. And then there will be an annual limit. For example, it might be $50,000 per year. If your item qualifies, purchase protection will replace, reimburse you, or repair the item. And the decision about the remedy is made by the Benefit Administrator.

There are also limitations – or exclusions – on the type of purchase that's eligible. Here's a sampling of the items that are often excluded: tickets to events, living things (plants, animals, etc.), rare collectibles, perishable or consumable items, household goods such as carpet, computer software, boats, and more. If you can't find your item specifically described on the issuer's list, then call and ask a service rep if your item is eligible.

How Do I File a Claim?

You need to refer to your card's benefits guide to know exactly what's required, but in general, here's what you should expect. And as already mentioned, there are time limits, so don't delay contacting your issuer.

Here's a general summary of how filing a claim works:

  • Call the issuer (or start the process online if that's an option) and speak with the Benefit Administrator. You'll get a claim form to fill out.
  • You have to fill it out the form within a time frame. For example, the issuer might require you to return the form within 120 days from the date of the incident.
  • You'll need to submit a variety of items with the form, including the receipt (yours plus an itemized store receipt), a police report if applicable, a photograph of a damaged item, insurance declaration forms that show other types of insurance coverage, and more depending on the requirements of your card issuer.
  • Any documentation that pertains to the incident, such as the conditions for the damage. And keep the item even though it's damaged because you'll probably be asked to send the item to the Benefit Administrator (or whomever you're directed to send it to). The shipping cost might be covered, but this varies, so you need to ask if you're expected to ship the item at your own expense.

What if the item was a gift? The lost or damaged item might still be covered, but you'll need to get all the required information to submit a claim. Tell the gift giver what happened. In most cases, the giver will want to take action to fix the situation. After all, the giver paid for the item and will want you to have the gift.

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