Plastic’s fantastic if you want money back
Paying by credit card can be a handy safety net if you don’t get goods or a supplier goes bust
Bad weather is bad for business. Around this time last year we were still extricating ourselves from the claws of the Beast from the East, and hibernation seemed like the only coping strategy. It was hard enough abandoning the comfort of our homes for essential tasks like walking the dog or going to work, so hitting the high street was pretty low down on the list of big freezefriendly activities.
The milder weather we’re enjoying at the moment has been a boon for retailers: spending in March picked up by 3.1 per cent year-on-year, according to Barclaycard data. Sprucing up our homes appears to be a particular focus – DIY stores saw a 10 per cent rise in spending year-onyear, while the amount spent in garden centres jumped by a third compared to March 2018.
The clutch of bank holidays over the next couple of months means it’s likely this trend will continue, with many of us earmarking the time to tackle those home improvement projects we’ve put off over the winter.
If you’re gearing up for a trip to the shops to stock up on the necessary equipment, using a credit card with a 0 per cent purchase deal will help you to spread costs (provided you make the minimum monthly repayment) – you can currently get up to 28 months interestfree.
But what if that fancy new lawnmower turns out to be faulty, or the kitchen company you’ve used goes bust before yours is fitted? Whether or not you need to borrow, putting yourpurchasesonacreditcard can give you valuable extra
protection if something goes wrong and the retailer can’t or won’t make it right.
That’s all thanks to a catchily named piece of legislation called Section 75 – part of the Consumer Credit Act 1974.
When you pay for goods or services costing between £100 and £30,000 with a credit card, in many cases Section 75 makes your card provider jointly liable with the retailer if thereturnsouttobeaproblem. This means you can ask the cardcompanyforarefundifan item or service is not delivered, is faulty or not as described, or the retailer has gone bust and hasn’t provided what you paid for.
Asifthatwasn’tgoodenough, you don’t even have to use your card for the full payment to be potentially protected for the item’s total value. You could pay just a penny of a £100 order on a credit card, and the remainder by cash, for example, and your provider would still be liable to refund the full £100 if something goes wrong.
There’s no time limit for making a claim, and doing so is straightforward – contact your card provider, explain the problem and say you’d like to make a claim under Section 75. It will usually request further details or evidence before it makes a decision. You can make a claim to both the retailer and credit card provider simultaneously, although you can’t recover your losses from both.
So far, so simple, but whether or not you have a valid claim relies on a very technical point: there must be a direct link between the ‘debtor’ (that’s you, the customer), the ‘creditor’ (your credit card provider) and the ‘supplier’ (the business supplying the goods or service).
Most payments in shops are processed via card schemes in a way that keeps this crucial link intact. But with the rise in online shopping and new payment processing firms, transactions are increasingly being handled in other ways, making it very hard to tell whether Section 75 protection still applies. For example, instead of a payment going directly to the supplier, it can sometimes be collected from you by an intermediary.
Ifthischainisbroken,section 75 may not apply – we’ve heard from customers who have lost this vital legal protection because they’ve paid for goods via third parties such as Paypal and Skrill, or card readers such as izettle and Sum Up.
Frustratingly, it’s often hard to tell at the point of purchase whetherthewayyourpayment is handled will invalidate the protection, and the Financial Ombudsman Service isn’t able togiveclearadviceaboutexactly how payment processors affect your Section 75 rights.
In situations where Section 75 doesn’t apply – because the debtor-creditor-supplier link has been broken, or if the value of the item is less than £100, – there’s another safety net.
Chargeback is an alternative protection that extends to debit and prepaid cards, but the chances are you’ve never heard of it. In a survey of 11,573 Which? members in May 2018, only 36 per cent said they were aware of chargeback, compared to 69 per cent who were aware of Section 75.
Unlike Section 75, it covers purchases of any value, but it’s not a legal protection. It’s a process agreed between financial institutions and the relevant card scheme (American Express, Mastercard or Visa), which allows you to ask for a transaction to be reversed if there’s a problem with the goods or services you’ve paid for. You might ask your bank to raise a chargeback if a retailer goes bust before you receive the goods, or if you’ve mistakenly been charged twice.
You’ll generally need to try to get your money back from the retailer before you can complete a chargeback request. Bear in mind the time limit – usually 120 days from the date you paid for or received the goods.
When it comes to consumer protection, plastic really is fantastic.