Play it safe with Section 75
SHOPPERS are being urged to use their credit cards when making major purchases, as they offer greater protection against the growing risk of bankruptcy among companies during the Covid-19 recession.
Credit card purchases between £100 and £30,000 are covered by Section 75 of the Consumer Credit Act, which makes the card issuer jointly liable if a service or product is not delivered and the retailer fails to offer redress.This is valuable if the company goes into adminstration, as recently happened to Debenhams and Laura Ashley, and travel companies Thomas Cook and Flybe.
Yet almost three out of 10 do not realise they have Section 75 protection for credit card purchases, while a similar percentage wrongly think they are protected for PayPal transactions. Section 75 does not apply to debit card purchases either.
You might claim debit card losses under a chargeback, but this is less certain. Alastair Douglas, chief executive of Totally Money, said with many retailers and services struggling due to coronavirus, credit cards bring peace of mind: “If you buy an item that does not arrive due to the company filing for administration or failing to deliver, the cost can be refunded.”
You can still get a full refund even if you only use your credit card for partial payment: “If you made an initial £50 payment on a £400 sofa, you would get all your money back.”
Overseas purchases are also protected, as are faulty or damaged goods. “If your new mobile arrives with a cracked screen, Section 75 covers this too,” Douglas added.
It also gives you hugely valuable protection against holiday or flight cancellations, and additional expenses such as hotels and food.
This also applies to other events, such as a cancelled music festival. Douglas said: “You may be able to claim for accommodation and train tickets.”
Section 75 protection does not apply when buying third-party goods through an online marketplace retailer like Amazon or flight and holiday aggregator Expedia. “You need to have paid the company directly,” Douglas said. He added that all credit cards have the same Section 75 benefits.
Your first port of call for compensation should always be the retailer you bought the goods or services from. If that fails, go to the credit card company, he said. “This might be your bank or building society, rather than Visa or Mastercard.They will get you to fill out a claim form and your money will be refunded.”
Another big advantage of credit cards is that you typically do not pay any interest for the first 55 days on purchases.
Barclaycard Platinum charges zero interest on new purchases and balance transfers for an introductory period of 18 months, although you pay 20.9 per cent after that.
Andrew Hagger, personal finance expert at MoneyComms, said aim to clear your credit card every month to avoid interest charges and spiralling debt: “Remember, any money you spend has to be repaid.”