Personal Finance

Best credit cards to extend your warranty coverage—for free

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One reason to reach for credit cards this holiday season—instead of cash—may be a hidden benefit most major cards already offer: Extended warranty protection.

Many consumers don't realize most cards from American Express, MasterCard, Discover and Visa add an extra year to a manufacturer's warranty, according to a study released Wednesday by CardHub. Among those four cards, the terms offered by American Express had the most benefits, while Visa ranks the lowest, mainly because its warranty boost is only available for its Visa Signature cards, said Jill Gonzalez, spokeswoman for CardHub, a credit card comparison website.

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"If an item of yours breaks or stops working, then first make sure it has a warranty," Gonzalez said. As an example, if an item has a one-year warranty, and you bought it with a credit card, there's a good chance your credit card will add one extra year of coverage—for free.

"So let's say you bought a TV and it has a one-year warranty. If it broke down in a year and two months, the (consumer would) provide receipts then the (credit card) network decides whether they will replace, fix or reimburse," she said.

CardHub's Credit Card Extended Warranty Study spells out which cards offer the most protections and least exceptions. For example, American Express and Visa will cover items that were purchased refurbished, such as a refurbished cellphone. Failure caused by wear and tear are not covered by MasterCard and Discover.

Maximum reimbursement amounts vary, depending on the card. And there are some purchases that are not covered—including software, cars, and real estate, Gonzalez said.

"Extended warranties are generally regarded as being among the biggest money wasters for consumers and the ability to garner necessary coverage at no cost through one's credit card can provide a valuable source of savings," the report said.

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However, the CardHub study does not evaluate whether the credit card networks are good at fulfilling warranties. The study only assessed the quality of the card offers.

Going cashless? Credit cards could be the most protected way to pay
Going cashless? Credit cards could be the most protected way to pay

Credit cards are expected to get a lot of use in the coming weeks, according to a forecast released Wednesday by the National Retail Federation. About 38 percent of shoppers said they would shop for holiday gifts with credit cards this year. Plus, 38 percent said they will use a debit or check card, while 21 percent said they would use cash and only 2 percent said they would use checks.

Consumers are increasingly looking to cards for benefits rather than a place to carry a short-term loan, said Michael Misasi, a senior analyst at Mercator Advisory Group.

"The trend is in the direction of consumers switching to thinking of credit cards more as a transaction tool and valuing the rewards and perceived security benefits as they have less of an inclination to borrow." he said.

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This story has been updated to correctly reflect that Jill Gonzalez, spokeswoman for CardHub, noted purchases including software, cars, and real estate are not covered by credit card extended warranties.