March 16, 2011 11:37 AM PT

When a Credit Card Extended Warranty is Worth It

Read more about Extended Warranty

Did you know you might be able to get an extended warranty on electronics and appliances with your credit card? Many credit cards have an extended warranty program. Call it a thank you from the credit card company for using their credit extension to pay for big ticket items. Most of the time, this benefit is a free one that just comes with your regular credit card, although, of course, restrictions may apply as to how you can use this benefit.

For instance, most American Express cards will add an extra year to a warranty of less than five years. Visa will usually add another year to a three year warranty. That extra year can mean a lot of money saved for items that tend to break down or have problems in the first few years of use.

You have to call your actual credit card company to determine if you have this coverage and how it works. The company may not cover all problems with an item. Generally, though, you simply have to keep all your receipts and the original warranty documentation for the item. When something breaks down, get a repair estimate that you can present to the credit card company. Many times you just have to submit everything over the phone, and you can essentially get your item repaired for free!

Some credit cards offer extended warranties that are much cheaper than what you can get in the store. If you’re planning to keep an item for a while and use it heavily, this might be something to check out. However, do compare the credit card company’s plan with the store or manufacturer’s plan so that you can see which one is really giving you more value.

When free isn’t really free

One of the main problems that can arise with an extended warranty through your credit card is the temptation to put items on your credit card when you shouldn’t. Almost always, the entire price of the item has to be charged to your credit card in order to get the warranty protection. As we all know, buying big ticket items on a credit card when you aren’t prepared to pay them off quickly can be a pretty big mistake.

Washer & Dryer
Washer & Dryer © Chris Corwin

Let’s say that you buy a $3,000 washer and dryer set. Charge it on your credit card, and pay it off over three years. Just at the time you’re out of warranty, you own your washer and dryer outright because you’ve paid off the credit card company. Then, something happens, and you need to cash in on that “free” extended warranty for a $200 repair.

Sure, you didn’t have to pay for the repair. The problem, though, is that you’ve paid over $700 in interest if you have a halfway decent APR of 15%! Clearly, the warranty wasn’t worth your while in this case.

The lesson here is to simply make sure you’re thinking things through. Just because you can get an extended warranty that will make an expensive appliance viable for an extra year doesn’t mean you should spend more than you can afford on a credit card. The key with credit cards, as we all know, is responsibility. Check out your warranty options, and then make a financially responsible decision for the items you want to buy that need a warranty.

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Follow @CreditDonkey or write to Abigail H at abigail@creditdonkey.com
Abigail H is a contributing writer at CreditDonkey, a credit card comparison and financial education website. Our data-driven analysis has been recognized by major news outlets across the country and has helped consumers make savvy financial and lifestyle decisions. (read more)

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Comments about When a Credit Card Extended Warranty is Worth It

  • Alan from California
    on June 13, 2011 11:32 AM said:

    I filed a claim on my laptop. I can tell you that it was quite a hassle.

    1) They don't accept e-mail but can e-mail you the claims.
    2) I faxed all requested docs and they came back saying the bank statement = letters are illegible. So I had to snail mail it in.
    3) The warranty documents from Lenovo doesn't clearly state 1 yr warranty, but the receipt does. They didn't accept the receipt's statement and was looking at the sample listed on the Lenovo's docs, and claimed that my laptop has a 3 years part and 1 year labor warranty when it was only 1 year part/labor.
    4) I sent in the screenshot from Lenovo with warranty status. They didn't want to accept the screenshot stating my warranty expired. Took a few phone calls, and I can tell you that calling Lenovo = waste of time: i) long wait 2) customer rep from India (wasn't able to understand what she was saying), called back and got another rep.
    5) Called claim and finally got someone with more brain cells and read through the warranty and finally got it approved.
    6) They didn't want to pay you back the tax you had to pay for the laptop.
    7) They approved it after speaking to the supervisor.
    8) They sent you a check without the tax amount included.
    9) Called them, they said they are going to re-open the claim and send the tax amount.
    10) They don't pay you back on the recycling fee you need to pay for the "screen" in California. Ok, I am tired I am not going to argue with them on this.

    Overall - Long and a lot of hassle.
    Credit Card: Citi Amex card.
    Company handling the claim: TWG Innovative Solutions Inc in Chicago IL.

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