Paying by credit card, refunds and Section 75: what you need to know
Using a credit card to borrow money is very expensive option.
But using one to buy stuff, especially bigger items, is a great way to protect yourself from faulty goods or dodgy sellers.
Credit cards operate under a consumer law known as Section 75, and it's very powerful indeed.
If you buy something on a credit card and find it doesn’t work, or you make a hotel booking, say, only to find the company you booked through has gone bust, you can use Section 75 to get your money back.
It works because, at the end of the day, when you buy using a card, your contract is with the card issuer who must supply what you’ve contracted with them to buy.
Section 75 is part of the Consumer Credit Act 1974.
Keep reading to find out how it can work for you and how to make a claim.
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What protection does Section 75 give you?
Section 75 gives protection for pretty much all purchases, but there are limits.
You must have paid between £100 and £30,000 for the goods or services you buy.
For these limits to count it’s what an item costs and not how much of a purchase you put on a card.
So, if something costs £300, but you split the cost and paid £250 by cheque, say, and just £50 on your card, you’d still be covered for the full amount if something goes wrong.
But if an item costs less than £100, there’s no protection.
It’s important to realise that these limits, lower and upper, apply to a single purchase only.
This can catch people out. If you bought two items at the same time and they cost £95 each, you wouldn’t be covered, unless they were both packaged together as part of a special deal – buy one get one half price or similar.
Then you would have a case.
Extras added to a purchase, like transaction fees, admin charges and so on, don’t count in taking the total over the £100 mark – it’s the cost of the item only that is taken into account.
How long have you got to claim?
There isn’t a time limit for a claim under Section 75, but in reality, it’s six years in England and Wales and five in Scotland under the statute of limitations.
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What about debit cards?
As a debit card is a direct payment from your bank to the payee, it doesn't come under Section 75.
But it is covered by different, less powerful protection, called chargeback, but this only applies to the purchase of items under £100 and it’s not a law.
There's more on reversing debit card payments here.
Basically, any form of payment that doesn’t operate under a credit arrangement is not covered by Section 75.
It doesn’t apply if you use a credit card cheque however, or a charge card, nor a prepaid or gift card because there’s no credit arrangement involved.
There’s a catch!
You need to watch out for claims made on purchase made by additional card holders.
This could apply if you are the main card holder and your partner, say, has an additional card.
If they made a purchase and wanted subsequently to make a claim it would have to be shown that the main card holder would have benefited in some way from the purchase.
Also, the law gets tricky when you make purchases through a third party, like a travel agent.
This is a grey area legally, but if services such as flights and hotel bookings are not delivered, then there are travel industry safeguards that kick in to allow you to get money back.
Be aware, too, that Amazon is considered a third party vendor, too, and so purchases made through them from another seller, would not be covered.
Amazon, however, does have its own strict policy on refunds and returns to protect the customer.
What about overseas?
So, if you use your credit card overseas, are you still offered protection?
The answer, within the same limits mentioned above, is yes.
How to make a claim
Don’t launch straight into a claim under Section 75.
The first thing to do is to take matters up with the vendor and try and reach a quick and acceptable solution. This is much less hassle for everyone involved.
If you get nowhere then it’s time to take matters up with the credit card company.
Contact them in writing and tell them the following:
– What it is you bought, how much it was, when you bought it and whether it was bought in store, online, etc. Include copies of receipts if you have them.
– Describe what has gone wrong, eg, the bike has a wheel missing, the hotel wasn’t built, and so on.
– Explain what you have done to resolve matters with the company.
– Explain that you would like a refund under Section 75 of the Consumer Act 1974.
Ultimately, if you fail to resolve matters in this way, the next step is to take matters up with the Financial Ombudsman Service.
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