Your rights when paying by credit cardYour rights

Paying with a credit card might be something you do only when you don’t have the ready cash, or when you’re buying by mail order or over the internet.

But there's another good reason why you might want to use your credit card more. This involves the special laws for buying on credit that give you valuable extra protection if something you buy is faulty, not what your ordered, or simply doesn’t turn up.

Extra shopping rights

If you buy something that’s faulty, doesn’t do what it is supposed to, or is not what you ordered, under the Sale of Goods Act you have rights to a refund, repair or replacement. You have similar rights if a service (such as work on your home) is not carried out properly.

In these cases, you’d normally contact the retailer you bought the item from, or the trader you contracted to do the work to get it fixed. And if they don’t help you, you can take legal action, for example through the small claims court, to force them to sort out the problem. For more about doing this, see our Dealing with faulty goods report.

Consumer Credit Act rights including section 75

However, if you paid on credit card, you have another option. Under section 75 of the Consumer Credit Act, the card company is ‘jointly and severally liable’ for any breach of contract or misrepresentation by the company. This means it is equally responsible along with the retailer or trader for the goods or service, and you can put your claim to the credit card company.

You don’t have to reach a stalemate with the retailer or trader before you can contact the company. However, this right is particularly useful if the retailer or trader has gone bust or it doesn’t respond to your letters or phone calls.

In a landmark ruling, the House of Lords has confirmed that section 75 does apply to foreign transactions. In 2004 the High Court said the Act didn't apply when people made purchases abroad. But that has since been overturned by the Court of Appeal.

The House of Lords has confirmed that the protection also applies if you buy goods for delivery to the UK from overseas by telephone, mail order or over the internet.

Which? has always believed that section 75 applied whether a card is being used in the UK or overseas.

When you can claim against your card company

There are some limitations to when a card company is liable along with the retailer or trader. The goods or services you have bought must have cost over £100 and not more than £30,000.

However, you don’t have to have paid the full amount on your credit card – the card company is liable even if you made only part of the payment (a deposit, say) on your card. And this part-payment can be as little as £1. It is the value of the goods you are buying that is key, not the amount paid on the card.

Also, the law applies only to credit cards and not to debit cards (such as Visa Delta or Maestro) or charge cards (where all charges must be settled at the end of the month). It's possible that you may be able to use 'chargeback' instead to get some or all of your money back - for more information see the Which? guide to chargeback.

When you can’t claim against your card company

There are some more complicated transactions where the company that dealt with your card payment is not the same as the one that provided the goods or services.

Paypal and similar online payments

For example, if you buy something online and use Paypal or a similar payment service, your card payment is made to Paypal (on the agreement they will send the same amount to the trader).

But, since no card payment is actually made to the trader, the card company isn’t jointly liable if there is a problem with the goods or service.

Credit card cheques

Section 75 doesn't apply to payments made by credit card cheque either. For section 75 to apply, there has to be an existing agreement between the credit card company and the retailer accepting the credit card payment. As credit card cheques can be paid to anyone, there isn't a pre-existing agreement, so section 75 doesn't apply. If you receive any of these cheques in the post, shred them - they usually charge a higher interest rate and offer no interest-free period.

Cash withdrawals

If you use your credit card to withdraw cash for a particular purchase, you won't be covered by section 75 as the link between the credit card company and the retailer has been broken. It's usually best to pay the retailer using the credit card itself. Cash withdrawals usually attract a fee and a much higher interest rate anyway, so are best avoided.

Additional cardholders

If your partner has a credit card and has added you as an additional cardholder, it's usually best to get the main cardholder (your partner) to make any big purchases, rather than using the extra card yourself. Several credit card companies have taken the view that section 75 does not apply if a purchase made on an additional card does not benefit the main cardholder.

When section 75 may not apply

For example, a wife buys some land using a credit card. She is the secondary cardholder on a credit card account in the sole name of her husband. The land is registered in her name because she bought it for herself as a development project. The land turns out to have been misrepresented by the seller. The wife's claim against the credit card company under Section 75 is unlikely to succeed as the land is not for the cardholder's benefit, in this case her husband.

When section 75 does apply

In contrast, take the example of a husband and wife buying a holiday club membership in joint names. The wife makes the purchase using her secondary cardholder card on the husband's credit card account. They say that the nature of the membership was misrepresented to them and the husband claims against the credit card provider under section 75. In this case section 75 does apply - the husband is a party to the joint purchase and will benefit from it, so section 75 applies even though they used the wife's card instead of the husband's to pay for the membership.

How to avoid section 75 confusion

While some credit card companies say they will treat section 75 claims from an additional cardholder in the same way as they would if the cardholder him- or herself had complained, other cases have been taken to the Financial Ombudsman Service for a ruling, with some going against the consumer. To avoid the inconvenience and uncertainty of a lengthy dispute with your credit card provider, avoid using the additional card for large purchases - it's better to get the cardholder to pay for the transaction, or get a credit card account in your own name.