Insurance was once only offered by credit cards, but these days debit cards offer cardholders free insurance. Insurance types vary by card, with prestige cards offering more coverage than regular cards. Insurance types include travel insurance, extended warranties and purchase insurance.
Debit cards are becoming more and more common these days as consumers become less inclined to purchase goods on credit. In addition to their regular benefits, many debit cards are starting to offer various types of insurance – this is especially true of debit cards that are also purported to be prestige cards.
Insurance was once only available on credit cards. Credit cards make money off the consumer in a number of ways, mainly by charging interest, annual fees and other types of fees and charges. These fees can then be used by the credit card company to pay for the “free” insurance that they offer to consumers. Since debit cards do not charge interest and generally do not charge annual fees, the bank does not make as much money when consumers use these debit cards.
However, both debit and credit cards earn money in another way as well. Whenever the card (whether debit or credit) is used to purchase goods at a merchant, the card provider such as Visa or MasterCard charges the merchant a small fee, for the use of the card processing facility. Over time these fees add up – this money can then be used to provide cardholders with free insurance.
Types of insurance offered on debit cards
Debit cards offer a wide range of insurance to customers. Of course, the exact insurance types vary according to the card and the issuer. Debit cards which are prestige cards tend to offer greater insurance coverage and more insurance types than other debit cards.
Travel insurance is one of the more popular insurance types that is offered on debit cards. This type of insurance is activated whenever tickets are purchased using the debit card. Dependents are also sometimes covered by the insurance, if their tickets are purchased using the card.
Travel insurance can be used to cover inconvenience costs caused by delayed or cancelled flights. Some prestige cards also offer to cover the cost of medical care in foreign countries.
Purchase insurance is another type of insurance that is offered on debit cards. This insurance covers a wide range of damage or loss that might occur to goods purchased using the card. The cover usually includes theft, loss or breakage within the first three months of purchase.
Many debit cards also offer extended warranties, whereby the manufacturer’s warranty on an item purchased using the card is extended by the debit card company.
