3 times when you can skip a home warranty

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Homeownership is such a joy. You stop throwing money in the bottomless rent pit and start investing it into your home equity. You also get to upgrade and decorate your home however your heart desires. You can taste the stability and pride that comes with becoming a homeowner.

But before you get all these beautiful things, there are quite a few hurdles to overcome and decisions to make when buying a house. Today we’re focusing on one: home warranties—specifically when you might not need one.

That’s right—you might not even need a home warranty. Read on to learn when it may make more sense to skip a home warranty.

Do you need a home warranty?

A home warranty is not the same thing as homeowners insurance which covers perils such as fire, theft, hail and some types of water damage. A home warranty is a service contract that protects a homebuyer against paying certain repairs and appliance replacements. For example, if your water heater at your new house stopped working, a home warranty can help you cover the cost of repairing or replacing it.

Purchasing a home warranty can give you peace of mind. When a major appliance or system breaks, it may cost you hundreds and often thousands of dollars to fix it or buy a replacement. A home warranty can protect you from such a blow to your budget.

On the other hand, there are instances when investing in a home warranty might not be worthwhile.

  1. You’re purchasing new construction. Typically, the builder will offer some type of warranty to cover plumbing, HVAC and electrical systems for up to 10 years. And appliances typically come with a manufacturer’s warranty. Adding a home warranty on top of that could be overkill, since you’d end up with duplicate coverage.
  2. The seller has agreed to provide a home warranty. If you’re buying an older home, the seller may offer to purchase a home warranty on your behalf. If that’s not the case, you can negotiate to have the seller cover the warranty premium for at least a year and even the deductible if repairs are needed. This way, you won’t have to worry about purchasing the warranty yourself for a while.
  3. You’re buying new appliances with the right credit card. If you’re remodeling and buying new appliances for your newly purchased home, you can count on extended warranty if your credit card provides it. All you have to do is make sure you’re using the right card for the purchase, and the item comes with a manufacturer warranty.

If your situation falls under any of these categories, you might not need a home warranty. But make sure you know exactly what coverage you have, so nothing falls through the cracks.

Best credit cards to use instead of a home warranty

Credit card extended warranty extends manufacturer’s warranty on eligible items purchased with that card. Extended warranties come with their own terms, including coverage limits and exclusions. It’s important to check these before you decide to put an item on a specific card.

Citi credit cards

Citi recently removed extended warranty from most of its cards, but there are still a few that offer it. And the ones that have it are the best in the market.

Citi extends eligible manufacturer’s warranties for two years and offers a maximum coverage of $10,000 per item. The maximum length of the original warranty Citi allows is five years, meaning you can extend your warranty to seven years in total. This is an incredibly generous offer, which makes Citi a top pick when you’re buying appliances for your new house.

Consider using the Citi Premier® Card, a flexible rewards card that earns 3X points on restaurant, supermarket, gas station, hotel and air travel purchases and 1X points on all other purchases.

American Express credit cards

Amex adds up to one year to the warranty on products purchased with an eligible card. The benefit covers items with a manufacturer’s warranty of five years or less, meaning you can count on up to six years of warranty coverage in total. The coverage is limited to $10,000 per claim and up to $50,000 per calendar year.

American Express offers extended warranty on most of its cards, so you have plenty of options here. For example, if you prefer cash back cards, the Blue Cash Preferred® Card from American Express can be an amazing choice with its 6 percent cash back on U.S. supermarket purchases (up to $6,000 per year, then 1 percent), 6 percent back on select U.S. streaming services, 3 percent cash back on transit, 3 percent back on U.S. gas station purchases and 1 percent back on all everything else.

If you’re an avid traveler, few cards can compete with The Platinum Card® from American Express. The card comes with great travel perks and earns 5X points on directly booked airfare and flights and hotels booked through American Express Travel, 2X points on prepaid car rentals through American Express Travel and 1X points on all other purchases. If you use it when buying new appliances, you’ll get a decent extended warranty—and rewards to use on your future travel.

Chase credit cards

The majority of Chase credit cards also offer extended warranty coverage. It can extend your original manufacturer’s warranty of three years or less for another year. This means that you can get up to four years of coverage on eligible items purchased with a Chase card. The coverage limits are $10,000 per claim and up to $50,000 per account.

Chase offers a wide variety of credit card products, so you have a lot of options to choose from here. If you prefer cash back and avoid annual fees, you can use the Chase Freedom Unlimited® that earns at least 1.5 percent cash back on everyday purchases, plus 5 percent cash back on travel booked through Chase Ultimate Rewards and 3 percent on dining and drugstores.

If you’re in the market for a premium rewards card, the Chase Sapphire Reserve® is one of the most popular products and comes with 3X points on eligible travel and restaurant purchases (after you earn your $300 travel credit) and 1X points on all other purchases. Currently, the card also offers 3X points on grocery store purchases up to $1,000 per month, then 1X points (through Apr. 30, 2021) and 10X total points on Lyft purchases (through Mar. 31, 2022).

Maximize your card’s potential

If you don’t have a card that offers extended warranty yet, it may be a good time to shop for one. Funding a large purchase like an appliance can help you meet sign-up bonus requirements. Plus, some cards come with a 0 percent intro APR period which allows you to pay off your purchase over a period of time without accumulating any interest.

Bottom line

When you’re buying a house, purchasing a home warranty may be a wise step—but there are also times when it’s wiser to skip it, especially if you have the right credit card. If you don’t, head over to CardMatch to get credit card offers tailored to your credit profile. Happy home buying!

Written by
Ana Staples
Credit Cards Reporter and Young Credit Analyst
Ana Staples is a reporter for Bankrate and an expert on all things credit basics and personal finance for the younger generation.