Credit card purchase protection: are you already covered?
MANY credit card providers offer what sounds like a great incentive to use their products to pay: extra protection on purchases.
But, often, these protection policies don't offer any more than people are already entitled to, free, under UK consumer law.
To sum up, the protection hierarchy goes something like this:
- Section 75 (find out more): Great.
- Chargeback (find out more): Very handy.
- Purchase protection insurance (skip ahead): Good, often useful.
- Refund protection insurance (skip ahead): Don't get too excited.
- Purchase delivery protection insurance (skip ahead): Already covered!
What makes protection under law, section 75, or from a card issuer, Chargeback, better than purchase protection?
That's what we'll look at in this guide, along with which providers offer these purchase protection policies.
Purchase protection insurance
Many credit cards, especially the premium ones, offer purchase protection insurance (not to be confused with the more famous PPI, payment protection insurance) at no extra cost.
It covers goods paid for with the card against loss, theft or accidental damage, usually for up to 90 days, or three months, after purchase.
As could be expected from any insurance policy, there are limitations and exclusions to the cover, so it's important to check the full policy details before relying on it.
It's common for second hand goods not to be covered, for example, and there are often limitations on item cost - in terms of maximum annual claim amounts as well as minimum and maximum individual claim amounts.
Other commonly excluded items include perishables, vehicles and items left in them, jewellery and electronics.
Even so, the cover goes well beyond what's available under ordinary consumer protection law and many people have benefited (see case study above).
Who offers it?
Here are the providers who offer this service, along with any conditions specific to their policies.
Note that this is a list of the providers who offer payment protection, not of the specific cards that do. It's not available on all the cards each provider issues, so do check before assuming coverage.
American Express: Protection against theft and accidental damage for up to 90 days after purchase. Excludes theft of electronics. £50 excess applies. Limited to £2,500 per claim and £20,000 in claims a year. Exclusions and terms apply. See more on the American Express site.
Capital One: Protection against loss, theft and accidental damage for up to 30 days after purchase. Only items bought entirely on the card are eligible - unlike with section 75. Exclusions include items lost in a way not connected to theft, fire, or damage caused by accident. Claims limited to £6,000 per item and £18,000 a year. Other exclusions and terms apply. See more on the Capital One site (pdf).
Post Office: Protection against loss, theft and accidental damage for up to 90 days after purchase. Exclusions and terms apply. No policy document online.
Ulster Bank: Protection against loss, theft and accidental damage for up to 100 days after purchase. No cover for items under £50, or over £3,500. Maximum annual claim total limited to £15,000. Exclusions and terms apply. See more on the Ulster Bank site here (pdf).
Purchase Delivery Protection
All Barclaycard credit cards offer purchase delivery protection.
The policy offers refunds if any new items bought with the card which should be delivered directly to your front door don't arrive. However, it excludes suppliers outside the UK as well as antique or second-hand goods.
In all instances, Barclaycard's purchase delivery protection refunds cannot exceed the card's credit limit or amount charged to the Barclaycard.
If the claim exceeds £5,000, Barclaycard will need to see more information to back up the claim. See more on the Barclaycard site here.
Under Section 75 of the Consumer Credit Act 1974, card providers are equally liable, along with the supplier, for any goods costing between £100 and £30,000, paid for - even in part - by credit card or store card.
That means, by law, cardholders are entitled to claim back from their provider the full cost of goods or services that have not been supplied or are faulty - even if, as mentioned, the credit card was used to pay for only a part of the full cost.
Visa and Mastercard also operate a system called chargeback. This protects cardholders when goods don't arrive, or do arrive but are damaged, faulty or not as described, or if an order is placed and paid for but the retailer goes bust before fulfilling it.
As they say, you do the math.
Purchase delivery protection might come in handy, but it offers less than is already available under Section 75 and chargeback.
Refund protection insurance
In a similar vein, many American Express credit cards offer refund protection insurance.
It covers the cost of items should a merchant refuse to give a refund when they ought to.
Individual items must cost between £25 and £200, with a maximum claim of £750 in any 12 month period.
American Express include a lengthy list of typical exclusions, which includes jewellery, books, goods bought at closing down sales, art and unique items, perishables, tickets, services and "items permanently affixed to home, office or vehicles" among others.
The policy is also restricted to purchases made in the UK. See more on the American Express site.
However, as we've seen, both section 75 and chargeback should do exactly the same thing as long as there really is a reason for the refund and the retailer is at fault.
A familiarity with the Sale of Goods Act is probably better insurance.
In short, the policy could be useful but it probably won't be, and cardholders will probably find it easier to claim using one of the other forms of cover we've outlined.
All in all
Credit card companies call these insurance policies "incentives", "bonuses", and "extras" as if they're really useful features.
But, far too often, the cover they offer is not much more than people are entitled to under law using Section 75 and/or the Sale of Goods Act, or through the Visa and Mastercard chargeback schemes.
As we said above, anyone who thinks they might have one of these polices should check - and then check the policy terms very carefully before assuming they're covered.
As we said above, anyone that thinks they might have one of these polices should check and then, if necessary, check the policy terms carefully before assuming that they're covered.
Please note we love celebrating our readers successes with purchase protection (and commiserating their failures) but we can only provide general information about it and cannot answer questions about specific cases in the comments. Sorry about that.
Find organisations which can offer specific help or information on our signposting page here.
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