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Little-known credit card perks

By Jim Wang ·
Monday, April 11, 2011
Posted: 4 pm ET

Credit cards are fantastic tools if you are responsible with credit. Whereas some people compare it to a hammer, a powerful tool when used properly, I like to think of it as a Swiss army knife. Like a Swiss army knife, there are parts of it that you will probably never use as often as the knife itself. However, in times of trouble, you'll be glad those tools are there.

There are several great credit card perks and protections that you probably didn't know about. Let's say you buy a brand new jacket and accidentally rip it on an errant nail. If you purchased it within the last 90 days using an American Express, MasterCard or Visa card, you have purchase protection that will reimburse you the cost of the jacket (or repair of the jacket) at no extra charge.

If you didn't know about that little perk, here are a few more that you might not be aware of:

Price protection
Discover a price drop three days after you buy something? Most stores will usually credit you the difference (since you would otherwise return the product and then purchase it again) but for those cases where you can't,  price protection is there for you. MasterCard and Visa offer 60-day price protection.

Return protection
Did you change your mind about a purchase but the store refused your return? Many cards offer return-and-refund protection for a limited period of time, usually around 60 days. This is great for those times when the store only has a 30-day return policy and you decide on day 31 that you no longer want it.

Warranty extensions
Don't you hate buying something with a one-year warranty only to discover that it breaks on the 366th day? If you made the purchase with a credit card, chances are the card will offer a free extension on the manufacturer's warranty for up to an additional year. Most cards will double the original manufacturer's warranty up to another year at no extra charge. This is another good reason you should skip the extended-warranty pitch at the store.

Auto rental liability insurance
This perk is a little more well known than the others but it's still one that bears repeating. Many credit cards will offer supplemental collision-and-loss insurance that is junior behind your primary auto insurance, if you have it. This means you can likely skip the extensive loss-and-damage waiver, or LDW, insurance that the car rental company loves to sell to you. Some credit cards don't offer this automatically and you'll have to pay extra for this coverage, though it's often cheaper than at the car rental counter.

Purchase protection
Certain cards, like American Express cards, offer purchase protection insurance that protects your purchases from accidental damage or theft for up to 90 days from the date of purchase. It's essentially a short-term insurance policy on each and every purchase you make with their card and it's paid for by the fees the card charges merchants. In the case of American Express, your protection is limited to $1,000 per occurrence and $50,000 per card account per policy year and is secondary insurance. All MasterCard and Visa cards also have this protection, called Purchase Assurance by MasterCard and Purchase Security by Visa.

Baggage insurance policy
Sadly, it's not uncommon for airlines to lose your bags and if you're one of the unlucky few whose bags are never recovered, the amount you can claim is limited by the Aviation Consumer Protection and Enforcement Department of the DOT. If you happen to exceed their limits, you may have recourse with your credit card company. American Express, for example, has a baggage insurance policy that covers up to $1,250 for carry-on luggage and $500 for checked baggage. It's less than the federal limits but it's supplemental, so it's in addition to the federal limits.

What are your favorite hidden perks of credit cards?

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April 25, 2011 at 5:52 pm

To Jack Spratt: the answer to your question is that most credit card customers do not pay in full each month, pay hefty finance charges, interest adds when payments are late and some have annual fees. Do not worry. The banks that issue these cards, and they may have thousands of different cards all with different ways to get into your cash stash. Part of the problem is the addictive nature of paying for things you do not need and cannot afford with "funny money," "plastic" or whatever term you care to use. Las Vegas casinos learned this a lot time ago and changed to chips rather than money. There are plenty of customers that have evolved to feel as if they do not need to pay back what they charge on their cards. After all, look at our Congress and their behavior towards the federal Treasury. It is really funny money to them and the cause of our 12 TRILLION DOLLAR DEBT (so far). Good luck.

Jack Spratt
April 25, 2011 at 6:58 am

Perk #7 has to be those marvelous pre-approved card offers with cash incentives, presumably reserved for those with flawless credit history. Recently received a card with $200 bonus reward points. Last month picked up a card which offered a $100 statement credit after the first $50 of charges. I remain perplexed by these generous offers, in light of the fact I haven't carried any balances in 5 years and rarely charge anything, so how do these banks intend to recoup these incentives? Apparently they are flush with cash resulting from the insignificant interest paid on savings and checking accounts, while charging 12% for card balances.

April 24, 2011 at 4:01 pm

Credit cards are a great way to build credit, even for those who are afraid to use them, or never had one before. If you don't have credit or have bad credit go to a credit union (they tend to have lower rates and fees) and get a secured card. You don't need a very high limit, typically $500--the amount you deposited for security. Get a card with little or no fees and if possible, with cash back.
The idea is to use your card every month, and then pay it of completely, so you don't carry a balance. So use automatic payment to put one thing on your card you would always pay anyway--your cell phone. Don't use the card for anything else. If you think you might be tempted, put the card in a Ziplock bag, fill with water, and stick it in your freezer.
When the credit card bill comes in, pay it off completely. You're using the card and paying it off, and that builds credit. And if it is a card with cash back, it's like you're getting a discount, too.

Marge Mathis
April 22, 2011 at 6:47 pm

Two comments. My card will send a reminder to pay if they haven't received payment by about 10 days before overdue, so you don't have to worry about forgetting to pay.

And....using a credit card but always paying in full allows me to have a few extra weeks to accumulate money to pay large bills....and time to transfer funds into my checking account.

April 18, 2011 at 5:12 pm

I love my American Express card. It lets me consolidat a lot of bills and track expenses for my business and other work-related items. I also get reward points for everything. It is a charge card, meaning it must be paid in full every month, so I can't get myself into trouble with it. I've earned enough reward points to take several cross-country airline flights already. Credit cards are just a tool. It's all in how you use them.

Paul H.
April 18, 2011 at 7:55 am

A credit card does not necessarily "enslave" you. The entire amount is due within 20 or so days after your receiving the bill. This gives one about 45 days (average) of float on your money and doesn't end up costing you anything. Also, it is great for record keeping as they send you a book showing all of your purchases and the categories used at the end of each year.

April 17, 2011 at 10:27 pm

I always use my card as a credit.The bank i deal with offers reward points if you do so.In a years time i end up with $300.00 in gift cards from the reward points i have accumulated that i would not get had i used debit.They come in handy at christmastime. Maybe the stores should offer a discount for using debit if it saves them money.

Dr Bruce
April 17, 2011 at 8:23 pm

Use of one credit card helps me consolidate a good deal of my monthly expenses, and paying it off in total each month helps also. Like anything, credit cards used reasonably are positive.

April 17, 2011 at 6:53 pm

I agree with Josh- Credit cards can enslave you. The balance should be paid off monthy so the interest doesn't consume your budget! Used in "emergencies only" not as a away of life unless you want all your money going to pay for stuff that is already used up or gone- but your payment for that item is still there!If you can't afford it- save for it- that will ensure you really want it but you wont be paying forever!!

April 17, 2011 at 5:46 pm

Just face reality and practice SIMPLE economics:

1) Pay off in full each month.

2) Do NOT purchase if you can't do cash.

3) Credit cards give you a simple and fast review of your spending habits.

4) Be responsible and quit expecting a "way" for others to pay your costs!

5) It is sort of like "GROW UP". Even though you may be 60 years of age. PLAN YOUR LIVING REQUIREMENTS!!!!!!