Why an extended warranty is often a waste of your cash

From appliances to electronics, there seems to be an extended warranty for everything these days.

While you're more than likely to get a heavy sales pitch touting all the benefits when shopping, consumer advocates say these plans, which can cost hundreds of dollars depending on the product you're covering, generally are not worth the money.

"It's a bit of a scam. These are money-makers for retailers and they push them pretty hard," said Bob Hunter, director of insurance for the nonprofit Consumer Federation of America. "There's also huge commissions on these products."

Warranties or extended service plans function like insurance, said Hunter, and for every dollar you spend you'll only get pennies back.

Before opting for a store-offered plan, Consumer Reports recommends researching the manufacturer's warranty first, which usually covers purchases for the first 90 days if not longer.

Plus, their latest report found most products didn't break within the window covered by service contracts.

Moreover, if you're purchasing that big-ticket item with your credit card you may already be getting extra protection and not even know it.

"Extended warranties can be a great free perk from credit cards. You just need to be prepared to jump through a few hoops and put up with a little red tape to take advantage of it," said Matt Schulz, senior industry analyst at CreditCards.com, which recently compared the plans offered by credit card companies.

This benefit is offered by most major card issuers and often can double the manufacturer's warranty for up to 12 months, Schulz said.

Just keep in mind these plans usually do come with some exclusions and generally don't cover normal wear and tear.

Retain all the paperwork from your purchase in the event you need to file a claim, including a copy of the receipt and your credit card statement showing the charge as well as a copy of the original product warranty.

Finally, Hunter suggested becoming something of your own insurance company when making big purchases, by taking the money you would have spent on the warranty and saving it in a separate account instead.

That way you'll have funds set aside to pay for broken products without breaking the bank.