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Credit Card Purchase Protection

When taking out a credit card, it can be tempting to skip the purchase protection to reduce costs, but is this a good idea or is purchase protection a necessary cost that everyone should just grin and bear?

Any purchase made with a debit or credit card already has an element of protection under Section 75 of the Consumer Credit Act 1974. This means that cardholders can ask their lenders to pay out for any goods valued between £100 and £30,000 that do not arrive as promised or are faulty.

This sounds like a good deal so what extra does purchase protection provide?

Whilst purchase protection does mirror some of the cover that Section 75 provides, it goes somewhat further. Purchase protection will usually cover the entire cost of an item – not just those valued at £100 or over. If you have bought something for £90 and it doesn`t turn up, you are likely to be pretty miffed as this is not an amount to be easily written off, yet under Section 75 no claim could be made.

The system that card providers such as MasterCard and Visa use to administer the claims is called chargeback and is well worth looking for in the small print of any purchase protection. There are usually stipulations about claims made under chargeback, such as having to notify the firm with a set period of the loss – usually between 120 and 180 days.

Purchase protection, as well as covering faulty and goods which do not materialize, also cover losses and damages, typically for a period of around three months. Some firms may charge an excess for this and may have a maximum value per claim, as well as per item.

Second hand goods tend to be automatically excluded in the purchase protection terms and conditions.

There are usually a number of other key exclusions such as jewelry, or components of jewelry such as precious stones, which is stolen from baggage as well as livestock, plants, vehicles, tickets or perishable goods.

Purchase protection will also not usually cover any damage which occurs as part of natural wear and tear, or the effects of either climatic conditions – such as rain or sun damage. Items which require repairing or replacing due to either moth or vermin damage are not usually covered either.

An increasing number of credit card companies are now offering purchase protection for free, especially platinum card firms, making it a useful add-on benefit, at no cost.

For larger purchases, many individuals may opt to take out a loan, rather than pay for the item by card, to ensure that the cost is paid off and remove the temptation to borrow more money.

Whilst this can be a wise financial move, loans do not offer the equivalent of purchase protection, meaning any transactions are not covered if the goods do not turn up or do not work as intended.

With many credit cards now offering low or even 0% interest rate deals, for those debating whether to take out a loan or a card, it may be worthwhile using a loans calculator to compare the two costs, but the added cover of purchase protection should also be taken into account.

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