Money mensch: Your credit card can protect you, too
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As the recession takes its toll on some of the high street’s biggest names, there are two little words I believe everybody needs to know: “Section 75”. This is a law that gives you massive protection for free.
Put simply, pay for something costing over £100 on a credit card, and the card company is jointly liable with the retailer if anything goes wrong. Therefore, if the company you’ve bought from goes bust before delivery, you can get your money back.
With big firms like MFI and Woolworths going into administration, this is valuable protection if you’ve ordered goods but not received them.
What is section 75?
This is not about the credit card companies being nice. It’s called Section 75 because it comes from Section 75 of the Consumer Credit Act 1974 and it’s a legal protection put in place so that you’re never in the position of paying for something you didn’t receive or which wasn’t as it should have been.
It ONLY applies to credit cards, NOT debit cards, cash or cheques. It can be anything from a flight to a computer, a kitchen to a sofa.
The simple rule is that if it costs between £100 and £30,000, and you paid for all or just some of it on a credit card, then the card issuer is equally liable if anything goes wrong.
Imagine you buy a kitchen that costs £10,000. If you paid £9,999 of it in cash or from your bank account, and £1 on your credit card, then, according to Section 75, the credit card company is jointly liable for the whole amount, not just the £1.
So, even if you don’t want to put things on your credit card, just put a small portion on the card and you get this valuable extra protection.
An easy way to put this in practice is if you need to pay a deposit, pay this on the credit card, but pay for the rest any way you choose.
You may be surprised to hear a money-saving expert extol the beauty of paying by credit card. Yet there’s a huge warning that runs alongside it. Credit card companies have a way of fighting back: they’ll charge you a fortune in interest.
So always pay it off IN FULL every month to avoid interest. That way you’ll get the protection at no cost at all.
Now let’s be clear here: the law doesn’t say the card company must give you your money back. It says you have the same rights as you have with a retailer.
So how might this work? Well, say you buy a radio from a shop, take it home and find it’s faulty. Before you can take it back, you find the shop has gone bust.
The credit card company’s still responsible for meeting your statutory rights. The item must be of satisfactory quality, as described, fit for purpose and last a reasonable amount of time.
That doesn’t necessarily mean giving you your money back, but they must pay to put you in the position you should be in, just like the retailer would’ve done. And this applies whether you buy on the internet, or even for things bought abroad.
There are a couple of times that Section 75 doesn’t apply. The first is if you buy through a third party, such as a travel agency or an internet payment service like PayPal. Because you are not paying directly for goods, this is exempt from Section 75 protection.
The other exception is when you don’t pay on the actual card, like credit card cheques or using cash withdrawn on a credit card.
You also have to be careful about what constitutes a purchase over a hundred pounds.
The law is quite plain. It says that £100 must be the cash value, excluding any fees or delivery charges of a single item.
A suit for £120 would be covered, but if it was sold as separate jacket and trousers at £60 each, these wouldn’t be.
Where this can be a problem is in cases such as the recent collapse of MFI, as many kitchen units are separately priced and cost less than a hundred pounds. Technically, these will not be covered even though the total value of the kitchen may be several thousand pounds.
However, this has never been tested in court, so if you’ve bought a collection of goods that YOU would define as single item, you may as well have a go.
Another interesting point is that under the law, you’re allowed to claim for consequential loss arising from a problem.
If you booked flights direct, the airline went bust and you had to spend money getting yourself home, you could legally ask the credit card firm for the full cost of the extra flights home, even if that was more than the cost of the original flights.
How to claim
It’s important that when you come to make a claim that you specifically say you’re doing it “under Section 75 of the Consumer Credit Act 1974”. Remember, the person in the call centre mightn’t have a clue what you’re on about, especially if you’re trying to get recourse for a faulty item.
Often they will say go to the retailer. If they do, they are wrong. You don’t need to go to the retailer; the card company’s jointly liable, though in general it’s easier to go to the retailer if it’s still operating. For full guidance to claiming and template letters, go to www.moneysavingexpert.com/section75
So overall, if you’re buying something over £100, use a credit card repaid in full each month for this extra protection. Even better, why not do it on a cashback credit card, so you get up to 5% back each time you spend too? Visit www.moneysavingexpert.com/cashbackcards for best buys.
Not got a credit card?
For those without credit cards, or buying goods under £100, there is a lesser protection to try. This applies only to VISA debit or credit cards, and it’s called Visa chargeback.
Within a 120 days of buying something, if it hasn’t been delivered, you can ask your bank to do a chargeback to the bank of the company you bought from, asking for the money back. As it’s the company’s bank, it should still have the money even if the company itself has gone bust.
This is a useful backup protection if you’ve paid by VISA, but it does not carry anywhere near the same weight as Section 75, as it’s only Visa’s regulations, not the law.