Question: Should I buy an extended warranty for my large gifts this holiday season?

Answer: Don’t you love the slew of questions at the checkout counter? Are you a rewards member? Would you like to sign up for a credit card to save $2.00. And the hardest one: would you like to buy an extended warranty?

Normally, we don’t have information about the original manufacturer’s warranty, let alone, an extended warranty. We certainly don’t know the important fine print. However, we want to be protected if plasma leaks from our new TV screen, or if the kids flush the new cell phone down the toilet. So what do we do?

Statistics shed an unfavorable light on extended warranties. Most damages occur during the original manufacturers warranty period – usually one year. Otherwise, products tend to outlast the extended period – usually three years. With overlapping warranty coverage during the first year, you are essentially wasting money.

Financial statistics also show extended warranties yield a high profit for stores: 60%-80% of fees go toward stores profits, while only 20%-40% are actually used toward repairs. Some retailers report up to 90% of their operating revenue comes from extended warranties.

Your best bet is to purchase the large gifts on a credit card that provides extended warranty coverage. American Express offers additional one year coverage identical to the original manufacturer’s warranty with all of its cards. Visa and Mastercard have a few limitations. Call your credit card company for details. Remember to pay the items off after purchase.

This article was originally published in the Lowell Sun and is for informational purposes only and not to be relied on as legal advice, in any manner.