To Pay by Credit Card or Not to Pay by Credit Card? That is the Question.

How do you get your money back when goods or services you have bought and paid for are not delivered as agreed or when the seller has gone out of business? Does the way you paid for your goods or services in the first place make a difference? Well, maybe.

In general, using a credit card offers most protection because under section 75 of the Consumer Credit Act 1974, the credit card company is “jointly and severally liable for any breach of contract or misrepresentation by the retailer or trader” (in other words if you can’t recover your loss from the seller of faulty goods and/or services you have bought, then you may be able to get it from your credit card company).

Section 75 also applies to store cards, store instalment credit and some car finance agreements (though not hire purchase). Debit card purchases or purchases of less than £100 and more than £30,000 are not covered by Section 75.

So for example, suppose you:

  1. Ordered a table lamp costing £45 which never arrived and had paid for it by credit card; this is not covered by Section 75 because the total purchase price is less than £100.  However, it may be covered by the Chargeback system (see below).
  2. Used your debit card to buy flights costing £2,100 directly from an airline which went into receivership; Section 75 does not apply here because it was a debit card transaction.  Again, the Chargeback system may apply.
  3. Used your credit card to pay a £50 deposit towards the cost of a television from a shop (total cost £1,800) and later found it was faulty; this could well be covered by Section 75 because although the deposit was less than £100, the total purchase price was between £100 and £30,000.

Other issues not covered by Section 75 include:

  •  credit card payment made through a 3rd party – such as PayPal, or travel or ticket agents,
  • credit card payment made by the secondary card holder (except where the purchases are clearly to the benefit of the main card holder),
  • catalogue credit purchases.

If a seller disputes or ignores your valid claim or is no longer trading you can make a Section 75 claim by writing to your credit card company saying clearly that the letter is a claim under “Section 75 of the Consumer Credit Act”. If the credit card company dispute your claim, you can take it to the Financial Ombudsman.

The Chargeback System

As well as covering purchases bought with a debit card the Chargeback system (which is not legally binding) can also be applied where goods and or services cost less than £100.

There are six main reasons for invoking Chargeback:

i) the company you bought from goes bust;

ii) items you have bought are not as described or defective;

iii) items are not delivered;

iv) technical issues;

v) clerical errors (incorrect billing);

vi) fraud.

If you want to make a chargeback claim you must act in accordance with the strict deadlines set by the card companies.  A claim must be made within 120 days of the time a problem was discovered.

Worried about something?

Don’t put it off – Citizens Advice Waverley can almost certainly help. For general information about consumer issues see: https://www.citizensadvice.org.uk/consumer/ or call our consumer helpline on 03454 04 05. For more general free, independent, confidential advice on a range of topics, from debt to immigration or housing and benefits to worries about how you are treated at work call:0344 848 7969 or visit https://www.citizensadvice.org.uk

Citizens Advice Waverley is a registered charity. You can help local people get the support they need by making a donation to Citizens Advice Waverley at https://waverleycab.org.uk/fundraising. Your donation stays local and will ensure we are here to help local people when they need it most.

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