Credit Card Protection – What It Is & How to Use It
There are several types of credit card protection: credit card purchase protection is complimentary insurance for damaged or stolen purchases; credit card price protection is a price-matching benefit; credit card return protection gives you extra time to get a refund on items you don’t want to keep; and $0 fraud liability protection means you won’t have to pay for unauthorized charges. Depending on what card you have, you might also get protection from other types of free credit card insurance, including coverage for accidents that occur while you’re traveling as well as travel delays and rental car damage. Some cards offer extended warranty protection, too.
All those forms of credit card protection are nothing but beneficial because they’re completely free. Credit card payment protection is a bit different, though. Credit card companies sell so-called “credit card protection insurance” to customers, pitching it as a way to avoid extra fees and credit score damage when financial hardship prevents you from paying. But because of loopholes and high costs, such plans often don’t turn out to be a good deal.
All credit cards provide protection against fraud, and by law you’re not liable for more than $50 of fraudulent charges (assuming you catch the fraud and report it). And you often get many other kinds of credit card protection as well, ranging from travel insurance to purchase protection, price protection and extended warranties. These benefits come at no extra cost to you.
Lastly, scammers may approach you selling “credit card loss protection.” They will claim that it protects you from fraud or say that your information has already been compromised. And they’ll try to convince you to give them your credit card number, perhaps even by pretending to be your credit card company or insurance provider. Don’t fall for it. Reputable financial companies won’t call you unsolicited, and you’re already plenty protected by your credit card company, anyway.
Below, you can learn more about all the types of credit card protection and how to take full advantage of the good kinds while ignoring scams.
Best Types of Credit Card Protection
You’ll always get credit card protection for fraudulent purchases. Federal law ensures it. Legally, you cannot be held responsible for more than $50 in unauthorized charges. And all major credit cards extend that to $0 liability. Many credit cards also go above and beyond to protect you against other things. You can check out an overview of the most common types of credit card protection below.
Here are the major types of credit card protection:
- Fraud protection: The major credit card networks (Visa, Mastercard, American Express and Discover) give cardholders a $0 fraud liability guarantee. That’s backed up by federal law, which limits liability for unauthorized charges to $50 (or $0 if your card is stolen and you report it before any charges are made).
- Purchase protection: If you buy something with your credit card and it breaks or is stolen, your issuer may repair, refund or replace it. Typically, this must happen within 90-120 days of the purchase date. Not all items are eligible.
- Price protection: We’ve all seen something go on sale right after we buy it. Credit cards with price protection will reimburse you for the difference between the price you paid for an item and a sale price you find within 60-90 days. About half of the major credit card issuers offer this benefit.
- Return protection: If you try to return a new, working item to a store within 60-90 days of purchase and the merchant won’t take it, the credit card company might reimburse you instead. As with the other benefits, exclusions apply. Only two of the top 10 issuers, American Express and Chase, offer this credit card protection.
- Travel insurance: There are a ton of varieties of travel insurance. The types of insurance include: trip accident, trip delay/cancellation, baggage loss/delay, emergency evacuation, emergency medical attention and more. Chase and Citi are consistently the top issuers.
- Rental car insurance: If you rent a car using your credit card and decline the rental agency’s insurance plan, your issuer may reimburse you up to the cash value of the car for collision damage or theft. Certain cars (exotic vehicles, trucks, motorcycles, etc.) won’t be covered, nor will situations like reckless driving or intoxication.
To find out which credit card protections you have, be sure to read your card’s benefits guide in full.
Credit Card Payment Protection Insurance
Your credit card issuer may offer you “credit card payment protection insurance.” Or, they might give it a similar name like “protection insurance” or “credit shield.” Such programs basically allow you to pay a monthly fee now in exchange for some breaks later if financial problems prevent you from paying your monthly credit card bill. For example, your credit card company might go easy on you if you lose your job.
Here’s what credit card payment protection can do for you:
- Suspend your payments and interest, typically for 12-24 months
- Keep your account in good standing by reporting your status as “current” to the credit bureaus
- Make your minimum monthly payment
You do not have to pay the issuer back for the monthly payments they make. Those are typically covered by the plan’s monthly fee. The cost of this type of credit card protection depends on how much you spend. In many cases, it may be less than $1 for every $100 charged to your card. But you pay it on a monthly basis, so that can add up over the years.
Whether or not these plans are worthwhile is up to you. You have to consider how much the insurance will cost each month and how likely you think payment problems are. You should also keep in mind that protection periods are fairly brief – only a year or two. And minimum payments are only a small percentage of your balance. If you have a lot of savings built up, you probably won’t need coverage.
Plus, it’s worth noting that credit card issuers may sympathize with you even if you don’t have credit card protection insurance. If you’ve suddenly fallen on hard times and are having trouble making your minimum payment, call your issuer and explain the situation. They may be willing to defer or reduce your payments for a few months to help you get back on your feet.
Credit Card Protection Scams
Unfortunately, not every protection plan is legitimate. Scammers sometimes try to sell consumers fake credit card protection policies, which promise to keep the buyer safe from fraud. But those offers are more likely to cost you money and cause fraud than to save you in either sense.
Here are a few common credit card protection scams:
- Offering “fraud protection” so you don’t have liability for fraudulent charges.
- Saying you need protection against “hackers” who can get into your account.
- Talking about a “computer bug” that could leave your account vulnerable.
- Pretending they’re from the “security department” of your credit card company.
Never give out any personal information to callers who claim to be from your credit card issuer. Call the company yourself if you want to discuss any sensitive information.
There are plenty of free ways to stay safe from fraud, too. One of the most efficient is to sign up for free 24/7 credit monitoring. This lets you know whenever an important change is made to your credit report, giving you the chance to act if the information seems suspicious.
Image: DRogatnev / Shutterstock
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