Why it’s time to kill off cash
Pay on a credit card for an item that costs £100 to £30,000 and it’s covered by Section 75 laws that mean the card company is liable with the retailer. If you order something and the retailer goes bust, as recently happened with Monarch, you can get your money back from the card firm.
Yet it’s actually far bigger than that. The joint liability means anything you can complain to a retailer about, you can choose to go to the card firm. If you buy clothes from a samba shop in Rio and discover a fault back home, you can ask the card company to sort it rather than “going back” to the shop. Plus, staggeringly, the card’s liable for the amount, even if you just pay 1p on it. In 2014 Linda Marriot paid a £200 deposit for a new kitchen on her credit card, and transferred the remaining £22,800 from a bank account. The kitchen firm went bust, so they asked the card firm for all the cash. It said no. So they used my mse.me/ section75 guide templates to go to the Financial Ombudsman – which made the card firm pay the full £23,000. The only time it doesn’t work is if you pay via a third party, e.g. a travel agent – that breaks the direct payment link needed.
Debit card chargeback means if you don’t receive what you paid for, and the retailer won’t give you the money back, you can ask your card provider to request the money back from the supplier’s payment processor. It’s not law but part of the rules imposed on card firms by Visa, Amex and Mastercard (£10 minimum).
It works on credit cards too, but Section 75 is stronger for those.
You must do chargebacks within 120 days of becoming aware of a problem, up to 540 days after a purchase.
It worked for Victoria when Lowcostholidays collapsed. She emailed: “Just received £1,400 from my booking after sending off MSE’s chargeback template letter. TSB paid in just five days. Thanks.”
A few credit cards pay cashback or rewards. It’s done in the hope that you’ll pay back a huge whack of interest. Yet set up a direct debit to repay the card every month, and never withdraw cash on it, and you’ll pay no interest.
The top payer is the fee-free www. americanexpress.com/uk – it pays 5% cashback (max £100) for three months, then up to 1% after. See mse.me/cashback for full best buys. This can be very lucrative, as Helen tweeted me: “I ‘earned’ £300 on my @AmexUK cashback credit card last year. Not hard swiping a bit of plastic to buy stuff !”
Many stores want a receipt for returns. Yet by law you just need proof of purchase. So pay on plastic and you can show a credit card or bank statement. Buy in cash then lose the receipt, and you’re stuffed.