Why do credit cards offer insurance but not advertise it?

Question

Many credit cards offer a number of features like rental car insurance and purchase protection, but these features are rarely advertised when you apply for the card. Instead, card advertising usually focuses on cash back, APR, or points.

Why offer these features if they are not used to attract customers? Are they required by a consumer protection standard? Or are they intended to attract new customers and I'm just not seeing the advertising because its common knowledge that these perks exist?

For example, if I browse for Chase credit cards, I have to follow three links to find information about the purchase protection insurance.

1. Start Page

2. Chase Freedom "Learn More"

3. Chase Freedom "Service and Protections"

Answer 1

In my opinion, people are simply more attracted to ''numbers''. So when they see an add with 2% cash back, they think :

Oh wow, I'll get more cash in my pocket at the end of the month.

In fact, promoting cash back and points probably ''sells'' a lot more than promoting insurance and protection. People like to get more money for free, also cash back and points tend to benefit to more individuals too.

So in fact, I would say that the only reason they promote points/cash back over insurance is for marketing purpose (they simply make more money this way).

Note : I don't know for US, but here in Canada, credit cards sometimes advertised their insurances and protections (mostly on internet ads). Altough, I see a lot more of cash back and points advertising.

Edit : I would add that insurance and protection are still really good sell arguments for a credit card. People will definitively look at the main benefits like cash back, points and APR but a lot of them will choose de credit card with the more benefits overall. People that travels a lot are a good example, since some credit cards will offer good protection while traveling. So insurance and protection are definitively selling cards too.

Answer 2

Perks such as cash back, airline miles, low interest rates, and zero annual fees are easy to describe. They do have fine print but people can understand them in a advertisement without needing a lot of words.

Other perks are more complex: purchase protection, rental car insurance, other travel benefits take longer to describe. These are also the same perks that are disappearing because they are finding that they do have a cost, but most consumers don't use them or consider them when picking their cards.

In the last couple of years I have had several cards end rental car insurance, purchase protections, and no-fee for foreign transactions. For my next vacation I will have split the transactions across multiple cards to pick and choose the benefits.

Answer 3

I don't know about the other features, but protection insurance is compulsory in UK. Well not exactly. The lender is equally liable as the seller, so if you have any claim, on the seller, then you also have it on the lender. e.g. if the product is defective, does not arrive, is not fit for the particular purpose (so if you tell the seller it if for a hamster, but it turns out to be for a mouse (even if it is clear in the brochure/advertisement), then you can make a claim against the seller, and the lender. (The lender will then make a claim against the seller, this is not your problem.) (You are only entitled to a remedy from one: seller or lender.)

However lenders will often try to sell you insurance, this is not needed, as it insures them, not you. They just scam you in to paying for their insurance.

Answer 4

For starters, why bank executives and marketing companies make decisions is anyone's guess. Clearly the folks making these decisions think competing on points is a more effective method of customer acquisition.

I'm not versed enough to understand whether it's the interchange network (Visa/Mastercard) underwriting the insurance or if it's the bank. If it's the interchange network it's not a point of differentiation, if it's the bank it's a cost center.

Getting a customer and keeping a customer are different. Sign up and I'll give you $200 is a good method of acquiring a new customer; certainly better than sign up and maybe in the future you might buy something just before a price decrease and the merchant won't price match so we'll price match it for you. If you were closing your account "But remember that we offer extended warranty on anything you purchase, are you sure you want to close the account and give up that coverage?" might be effective to keep you.

There was a time that the major credit card benefits were all purchase insurance related. They were paid for by your annual fees. For American Express these lines of coverage are literally underwritten by a subsidiary insurer. Really there was a time that the only benefit to a credit card was the simple fact that you didn't need to carry the cash. Competition grew the array of benefits. To some extent the purchase protection benefits are just a relic of the days before cash-back and are actually quietly being dropped from some cards particularly the non-flagship no-annual fee cards that have to compete with points now too.

Over time laws have expanded and imposed some of these things on merchants anyway, like mandatory returns within X days. Once a merchant has a legal obligation to take an item back it only makes sense to price match it within the X days so at least they don't have to restock the item and this merchant requirement really dilutes the value of purchase price protection offered by your credit card.

Personally, one of the selling points for me on my main card was primary rental car insurance. A lot of cards have rental car coverage, but it's secondary to your personal car insurance, this one is primary.

Answer 5

The companies do market analysis and learn/guess what will help them sell their services over their competitors. The items that attract most people are put in front. Items that are offered because a number of clients request them are listed, but further in the 'back'. Since interest rates and cash back and balance transfers are primary selling points, that's what you see.

Answer 6

In addition to the other answers - To some extent it makes more sense to hide some of these perks, as if someone chose the card just for that perk, they'd be more likely to use it.

They offer a protection or insurance like that based on an estimation of what percentage of people will use it vs how much it costs per person that uses it, on average;

If it were on the front page, and say 75% of people were aware they could use a perk such as price protection, for example, you'd find the proportion of cardholders using that perk spike from say, 4% to 15%, at which point it may no longer be financially feasible to offer that protection.

In other words - They don't incur a cost if you make use of the items they put on that front page. That's information that 100% of cardholders could know, and wouldn't impact their profits.

They have other perks, but those are slightly hidden and the users that are interested in those and that those matter to, will go and find those.... but if they broadcast them to everyone they'd likely cost too much and they'd have to pare down the list of these perks on each card.