Credit cards and consumer rights

We make around 14.5 billion payments a year in the UK alone by debit or credit card. And the boom in plastic payment is predicted to continue with 21.9 billion payments forecast for 2026. Cash payments, on the other hand, are anticipated to fall by some 43% by 2026.

So, while cash may have been king, plastic has its hands firmly on the crown. It’s not just the convenience of a card, but the rights you trigger by using one are an important safeguard.

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Credit card

When you pay by credit card for something that costs more than £100 and up to £30,000, the credit card provider has a legal liability if the goods or service are faulty, go wrong, are wrongly described, or are not delivered. It is called ‘section 75’ (or s.75) protection after the law that introduced it back in 1974. The first place to complain is where you bought the item or service. But if they are unwilling to refund your money or have gone bust, then the credit card provider has liability. 

How to use credit cards to protect your consumer rights

For example, if you buy a package holiday and the business collapses or you pay for something that never arrives, you can claim on your credit card provider. Similarly, if you buy an electronic device and it goes wrong after a month, or clothes turn out to be faulty, the credit card provider must refund you if the shop or supplier will not. The right also applies if you pay only part of the cost on your credit card, as long as the total cost is more than £100 or up to £30,000. So, if you pay a small deposit for a sofa, for example, on your credit card and then pay the rest by bank transfer or cash or cheque, the s.75 rights apply to the whole transaction.

This protection covers all credit cards – including American Express credit cards (but not charge cards). There is no time limit on making a s.75 claim, but it is always best to make a claim as soon as possible. The normal time limit on legal claims is six years, so a refund may be difficult to get if you leave it longer than that.

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Debit card

You also have rights when you pay by debit card. It is called ‘chargeback’ and is a contractual agreement between the bank that issues your card and Visa or MasterCard. It means that the bank has to refund your money where goods or services are faulty or go wrong. It covers all the things that s.75 covers but there is no lower limit (though MasterCard does not do refunds under £10). It applies equally to credit cards, so may be useful for Visa or MasterCard transactions up to £100 that s.75 does not cover.

Because chargeback is not a right given by law, banks are sometimes difficult about it. They should not be – Visa and MasterCard include it as part of the contractual deal with the banks. Sometimes the bank may say it will refund only if they can get the money back from the supplier’s bank. They will try to do that, but your right to a refund does not depend on the bank being successful.

There are time limits for claiming chargeback – you should always claim as soon as you know something has gone wrong anyway. Normally you have to claim within about four months (120 days) of realising something has gone wrong. If you miss that for a good reason, there is an absolute time limit of around 18 months. It is always safest to claim as soon as you can.

Chargeback rights also apply to prepaid MasterCard or Visa cards.

How to use balance transfers to clear debt

How to claim

Write to your bank or card provider with full details of what has happened. State that you are claiming a full refund under s.75 of the Consumer Credit Act or under the chargeback procedure and that if you do not get a satisfactory response within eight weeks, you will take the claim to the Financial Ombudsman Service. You have six months to do that.

The Ombudsman upholds more than a third of the claims that reach it. It costs you nothing, but the firm will normally have to pay £550. You must go to the Ombudsman within six months of receiving a final refusal from the card provider.

How to complain effectively

Other payment systems

It can be harder to enforce your rights if you pay by PayPal or other alternative means. If your PayPal account has no credit in it and your payment is taken directly by PayPal from your credit card, you are covered by s.75. But if you have a balance with PayPal that is used to pay for the goods, you are not covered.

Many payment services, including PayPal, have their own protection schemes if goods or services are faulty or not provided. But if you want statutory or chargeback rights, it is safer to pay direct with your own card.

Can I keep goods delivered to me by mistake?

Online

If you buy something online or by telephone, then you have an extra right, which is that you can simply return it within 14 days for any reason – or indeed no reason – and get a full refund.

You may have to pay the postage – but if the seller does not make that clear when you buy the item, then the seller must pay for the postage, though making them do so can be tricky. If goods you buy online do not arrive, then that is the seller’s liability – not yours or the delivery company’s.

Late deliveries – your rights

Informative, in-depth and in the know: get the latest news, interviews and reviews with Saga Magazine.