Extend the warranty without extending your wallet

Broken Phone

Purchasing expensive goods on your credit card can extend the warranty for no additional cost. Image: Flickr / Dave on Flickr / CC-BY-SA

“Would you like to purchase an extended protection plan?” is something you will likely hear when making just about any major purchase. Extended warranties are like an insurance plan for expensive purchases and are often expensive. Many people do not realize, though, that extended warranties can sometimes be added for no additional charge.

Benefits of an extended warranty

There are several benefits to extended warranties. Electronics and other expensive purchases can break or get damaged, and a warranty can prevent an expensive replacement cost you hadn’t planned for. Extended warranties can often cover more than just breakage; the warranties can cover repairs and even maintenance.

Average cost of an extended warranty

Despite all their benefits, extended warranties are usually not worth the cost. The profit margin on a standard consumer electronics extended warranty is between 40 and 80 percent. All things considered, extended warranties are expensive and carry a very high markup and profit margin for retailers. Financial advisers often say you should whatever money you may have spent on an extended warranty into a savings account that you use to pay for repairs if they are needed.

The secret warranty

Most electronics and consumer goods come with a six-month or one-year manufacturers’ warranty. Almost all major credit cards offer a warranty policy that will double or extend a manufacturer warranty. The purchase must be made on that credit card, and the card must be kept active. Each credit card issuer and bank has a different policy of what may be covered and to what extent, so it is important to read the fine print. Keeping a very detailed trail of documentation is also important so you can prove your qualification for the extended warranty protection. Even if you are purchasing on a credit card for an extended warranty, you should be sure to pay it off as soon as possible. The interest you may pay on the debt could be more expensive than an extended warranty may have been.

Sources

Consumer Affairs
Creditor Web
Mint.com

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