Debt Views

The National Retail Federation announced last month that U.S. consumers plan to spend an average of $816.69 on holiday-related shopping for others and another $106.67 taking advantage of special promotions and discounts to treat themselves. This brings total planned holiday-related spending to $923.36.

Over the past 5 years the method of payment for holiday spending has shifted, according to the NRF. Cash use for purchases has fallen steadily over the past five years from 33 percent to 24 percent. There has also been a drop in check use from 13 percent to 6 percent. This year check use should fall to 0! Seriously, who uses checks anymore? The use of credit cards has fluctuated up and down between 27 percent 5 years ago and 31 percent last year. The big gainer in use has been the credit card’s plastic cousin, the debit/check card, increasing from 27 percent in 2002 to 39 percent last year.

It is clear that using a form of plastic is the direction consumers are headed, but not all plastic is created equal. Those using a debit/check card are putting themselves in unnecessary risk and loosing out on great security features that switching to one could give you.

There are several ways that credit cards offer security that no other form of payment can. For starters, you don’t risk losing your cash if you have your wallet or purse lifted while shopping.

Secondly, if you use a debit/check card for a purchase, the money is immediately taken from your account. That may be good for people who cannot budget well, but if there is a problem with the transaction, like a higher amount is taken out than you authorized, the money is gone and you’ll be without it until you can get it straighten out. With a credit card if a higher amount than you authorized is charged, the bank’s money is gone.

Thirdly is the reason for this article. If you are planning a significant purchase there is a definite advantage to paying for it with them over anything else.

Features vary from company to company and even from card to card, so check with your issuer for details of features available on your card. Odds are however, if you are carrying a VISA, MasterCard or an American Express card, you have some pretty great features available that don’t cost you a thing and most people don’t even know about, let alone cash in on. Currently Discover Card does not offer these services.

Extended warranty protection

Whether the name is Buyer’s Assurance Plan from American Express, Warranty Manager from Visa or the obvious Extended Warranty from MasterCard, the feature is the important part. Most personal cards, the terms are different for business cards, will automatically double the length of the original manufacturers warranty by up to one year if you charge the entire purchase price to your card. A 90-day warranty on a digital camera for example would become a 180-day warranty. The doubling effect would cover a product with a manufacturer’s warranty of one year for one additional year. Extensions do not go beyond one year.

There are some limitations. American Express won’t offer the extended warranty coverage for a product with an original manufacturer’s warranty of longer than five years. VISA says three years and MasterCard says one year. There are additional limitations when you purchase an extended warranty from the manufacturer or retailer.

As mentioned, this coverage extends to items purchased as gifts as well. Just be sure in all cases to keep your paperwork such as the original receipt, charge slip, your monthly statement, product serial number, and copy of the manufacturer’s warranty.

Satisfaction guaranteed

Have you ever purchased something electric, maybe a CD player or blender, and a week or two later you just don’t like it? Perhaps it functions funny or not as you originally thought. You tried returning it to the store, but the manager wasn’t interested because you were outside the store’s return policy. You may be able to take advantage of American Express Return Protection or MasterCard’s Satisfaction Coverage which says that if you are dissatisfied with a purchase within a certain time period, like 60 to 90 days, you may be eligible for a refund. This is particularly good for items like kitchen electrics or home electronics. This coverage can also be great for new items purchased on eBay or through the mail.

Accidental damage or theft protection

Most card holders can benefit from the safety and security offered through a purchase protection plan or as MasterCard calls it, Purchase Assurance Coverage. This plan will cover purchases made using the credit card against theft, loss, or accidental damage that occurs, typically within the first 90 days. It covers you in the event that you purchase an item using your credit card that becomes damaged on the way home or soon thereafter, becomes lost, or someone steals it. Obviously this is great if an item is stolen, but also useful if you have a broken item that the store won’t take back and the manufacturer won’t fix it because it insists it was your fault.

Repairs or refunds

In most situations, for each type of coverage, the credit card company will refund the amount of the purchase as shown on your store receipt or statement, back onto your account. There is almost always a maximum limit to how much money can be refunded under the insurance. In other cases they may decide to repair or replace the item. This of course, is at the discretion of the company. Also, they will not pay for shipping and handling, installation, tech support or any of the other ancillaries. There is nothing to sign up for and you don’t have to register to get coverage. It is automatic when you make the purchase with a credit card. Some companies however do offer a registration service to expedite future claims.

Read the fine print

All of the information contained here only scratches the surface. Naturally there is a lot of fine print. As you would expect, conditions and exclusions apply. The benefits also vary by issuer so be sure to check with the bank for specifics. In general, if you do qualify for a claim, you will find the benefits are quite generous. Call your credit card company and ask them to send you the detailed information about the programs available with your card, not just a list of the program names.