A quick guide to credit card consumer protections

Credit cards were invented in the 1950s as a way of validating an intention to pay at a later date. Since then, credit cards have evolved considerably, and while the concept remains the same, the benefits and uses are much more advanced. Some credit cards are basic purchase cards: you make a payment using the credit card and repay the balance at the end of your statement period. Some credit cards include cashback rewards, balance transfers and even free foreign currency withdrawals. The type of credit card you need depends on how you manage your finances and your general day to day living. The important thing to remember, however, is that all credit cards are a form of borrowing, so even if you have a 0% interest rate credit card, you should avoid spending the credit if you’re unsure you can afford to repay it.

Section 75 Criteria

Section 75 of the Consumer Credit Act 1974 was created to give consumers legal protection against repaying a debt for a service or product they’ve not received. There are a few ways that Section 75 can help, but there are also a few conditions that must be met in order to invoke it:

• The item or service must be over £100
• At least £100 of the purchase must be made using a credit card
• The purchase is made in your name using the card in your name
• You have already tried to claim a refund through the company directly

Normally, if you order something online or book a holiday for example, and then the item doesn’t arrive or the holiday gets cancelled, you can claim a refund from the retailer or holiday provider – in some cases, you may even claim it from your travel insurance. Section 75 comes in when the retailer or holiday provider is unable or unwilling to give you a refund. There may be various reasons for this, such as the company going out of business.

You have 120 days to make a claim using Section 75, so it’s always good to act as soon as you notice a problem as you will have to claim through your retailer first.

When your consumer protections might apply…

Below are some specific examples to help you understand real-life scenarios that might occur where you might need to make a claim under Section 75. The below all assume you have paid at least £100 of the cost directly on your credit card, and the purchase is in your name.

• You buy a new vacuum cleaner, but the item is never delivered.
• You order a glass coffee table but when it arrives, the glass is smashed, and the retailer refuses to refund you.
• You purchase a new sofa with a 12 week lead time, and before your sofa arrives, the company goes out of business.
• You buy an expensive pair of shoes online, and when they arrive, they are blue instead of pink.

Are credit cards the best way to borrow?

Choosing a suitable borrowing method is never a quick decision because there are so many factors to take into consideration. Some of the main influences include why you need to borrow and your budget for repaying the funds. If you only need a small amount of cash for a short period, then there are a variety of online loans available that could meet your cashflow demands. If you’ve got a relatively large expense coming up, you may prefer looking at credit cards or even a personal loan from a bank to help you financially. Deciding on an appropriate type of credit can make managing the repayments much easier. You can look at what credit cards should be used for, if you need a little extra help choosing a borrowing option, but it’s also important to note that borrowing might not solve all of your financial troubles. It can be a great help in times of temporary cashflow shortfall or if you’re in a stable financial situation, but it can also exacerbate existing money problems and make it harder to manage your finances. Just try to make sure that you’re borrowing for the right reasons and that the repayments are affordable!