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Section 75 explained: How spending on a credit card can give you huge protection on things you buy

Image of suit armour as symbol of Section 75 protection

This piece on Section 75 is by The Treasurer from Team Monevator. Check back every Monday for more fresh perspectives on personal finance and investing from the Team.

I was once scared of credit cards. I believed saving up for things I wanted to buy was always the right thing to do. Credit cards were the work of the devil. They were designed to trap you in debt at hideous interest rates.

I still believe those things to some extent. If I want something, I’ll save up for it. I only ever splash out if I have a real need, or if I consider it excellent value for money.

And I still think some credit cards – such as those with eye-watering interest rates pushing 40% – are awful. Especially those that target sections of society who can least afford it.

Yet as time has gone on I have also grown to understand that credit cards are essentially tools. Albeit tools with a dangerous edge.

Think of a credit card as like a very sharp knife. Extremely useful in the hands of a Michelin star chef. Less so – and potentially dangerous – when wielded by an amateur cook.

In other words, use credit cards in the right way (often contrarily to the goals of the card provider) and you can benefit, at no cost to you.

Get it wrong and you could find yourself servicing interest for years. That will leave your dreams of early retirement in ruins.

Cashback is a quick credit card win

An obvious way to use a credit card to your ‘advantage’ is cashback.

With a cashback credit card, you earn small amounts of money every time you spend on it. You’ll profit on everything you buy, so long as you pay off the balance in full every single month. That way you avoid paying interest.

I put ‘advantage’ in quotation marks above, because card providers still benefit when you use their card. Retailers must pay the card provider a small fee for each transaction. So using a cashback credit card as I’ve described won’t make your card provider lose sleep.

Of course your card provider won’t mind if you miss a payment and owe them a nice bit of interest, either. So unless you enjoy contributing to a banking giant’s annual Christmas party, set up a monthly direct debit to regularly clear your debt.

What is Section 75?

Now onto another way you can make credit cards work for you – to use one solely to benefit from Section 75 legislation.

Section 75 is part of the Consumer Credit Act. (Section 75 of it, shockingly enough).

This legislation dates back to 1974. The legal eagles who wrote it thought it would be unfair to have someone borrow to pay for something on a credit card, only to not receive the item, or to suffer issues down the line. Especially if they were still in the process of paying for it!

Today, almost 50 years later, Section 75 remains a powerful consumer tool:

  • Pay for something on a credit card that costs between £100 – £30,000 and Section 75 will automatically apply to your purchase. (As long as the thing you’ve purchased is for you).
  • Section 75 means the card provider which you buy from is equally liable for your purchase. So if anything goes wrong, you can knock at their door for a refund.

Importantly, you don’t have to pay for the whole item on a credit card for Section 75 to apply.

Pay just £1 or 25p –or any other humorously low figure – on a credit card, and your whole purchase is protected. Up to £30,000.

So if you’re buying a new car, then agreeing with the dealer to pay £100 on a credit card will give you protection on the whole purchase price.

You may find this a bit silly. But some retailers may put restrictions on the amount they’ll accept on a credit card, due to the processing costs involved.

(Since 2018 retailers can no longer charge a fee to use a credit card. However they can refuse to accept them).

Section 75: What are the main benefits?

Section 75 is particularly good for dealing with cases whereby a retailer has gone into liquidation.

For instance, you order a sofa and the supplier goes bust between the time it takes your payment and the delivery date – which can often be months away. Section 75 protection means the card provider can refund your cash. This sure beats making your case to an appointed administrator. There you’d probably have to settle for pennies in the pound, at best.

Section 75 doesn’t apply only when a retailer has gone bust. Say you want a refund for a defective or missing item and you’ve had no luck convincing the retailer to give you your money back. Section 75 enables you to seek a refund from your credit card provider instead.

A Section 75 claim doesn’t mean you’ll definitely be refunded – the card provider may not agree with your claim. But it’s fair to say that a banking giant is far more likely to pay up than a struggling retail provider keen to keep your cash. Financial companies usually have deeper pockets.

Even if your Section 75 claim is turned down, that’s not the end of the story. When you’ve paid on a credit card, you have the added option of taking your case to the free Financial Ombudsman service. It will then make a ruling on the behaviour of your card provider.

Remember, Section 75 makes both the retailer and card provider equally liable. So you don’t have to take your refund case to the retailer first. You can go straight to the card provider if you wish.

Section 75: What should I look out for?

There are no real drawbacks of Section 75. However there are some things to watch out for should you wish to rely on the protection.

Firstly, if you’re paying for something with Section 75 protection in mind, ensure it’s for your own personal use as the cardholder.

While the law isn’t set in stone, you may suffer some pushback if you make a claim via Section 75 for an item or service that wasn’t intended for your own use. (That said, one popular consumer website suggests that group bookings should be covered.)

Secondly, for Section 75 to apply make sure the thing you’re buying is actually over £100.

Annoyingly, if you buy two single flight tickets costing under £100 each – with a combined cost over £100 – you probably won’t have any luck with a Section 75 claim. However, a return ticket costing more than £100 means the cover will apply. It’s considered a ‘single item’ in the eyes of the Consumer Credit Act.

Thirdly, there may be an issue with relying on Section 75 protection if you buy via a third-party intermediary. More on that below.

Finally, if you’re buying something costing less than £100, don’t assume that you haven’t got any protection at all.

Lesser ‘chargeback’ protection applies for all purchases made on either a credit or debit card. This protection doesn’t have a legal basis. Rather it is part of rules associated with the major card processors (Visa, Mastercard, and Amex).

With chargeback you can ask your card provider for a refund. However unlike Section 75, under chargeback your card provider will seek a refund from the retailer you purchased from, rather than reimbursing you directly.

While it’s much less powerful than Section 75 protection, chargeback is still a consumer tool worth remembering.

My own personal horror stories

Knowing I’m a personal finance wonk, friends and family members often come to me for unofficial guidance. Despite this I’ve found convincing them to sign up for a credit card – solely for Section 75 protection – a tough sell.

That’s ironic, given that in my personal life I’ve seen the importance of paying for big purchases on a credit card.

A few years back, a former flatmate contacted me for help. She had paid upfront for a teeth whitening service. The provider went into liquidation when she was only a quarter of the way through her treatment. I was horrified to learn she’d put the £3,000 treatment on a debit card.

Unfortunately my efforts to convince her to use a credit card for all big purchases in future couldn’t bring back her lost cash. And I’m sorry to report that her chargeback claim was unsuccessful.

Similarly, but fortunately not so devastating, a family member recently purchased a large camping item from a retailer based in continental Europe. The value was just shy of £1,000.

The first I’d heard about this purchase was when I was contacted to ask for help when the item didn’t arrive. I asked what was used to purchase the item. Yes, you guessed it, a debit card.

A package did eventually turn up, albeit in a very damaged box. It was the wrong item! The cost to send it back was over £80. Other than explaining to my family member how easy it would have been to claim back the cost from a credit card provider, there was nothing I could do.

The same family member also experienced difficulty in claiming a refund for a long haul flight last year that was later cancelled due to Covid-19.

While Virgin Atlantic eventually gave way and refunded the money many months later, this was another instance where Section 75 would probably have come up trumps.

Third-party complications

If you want to rely on Section 75, try not to use a third-party service if you can.

There have been a few stories of people missing out on Section 75 protection due to a requirement that there must be a direct link between the customer, the credit card company, and the supplier or retailer.

Using a third-party website, such as a travel agent, may therefore mean you won’t be able to make a claim under Section 75. That’s because the travel agent may be seen as ‘breaking the link’ between parties.

I say ‘may’ as the rules on this are pretty blurred, and there’s conflicting information across the web.

To play it safe, always book direct if you can. So if booking a flight over £100, for instance, it’s probably best to go directly to the airline’s website rather than going through a travel agent, if you want to maximize your Section 75 protection.

Section 75: The takeaway

I’m wary of calling anything a ‘no-brainer’. We should always consider the drawbacks of any particular product.

Yet, as long as you don’t use a credit card to recklessly borrow, signing up for a credit card and using it to pay for anything over £100 really is a no-brainer, due to the free Section 75 protection you get.

But don’t just take my word for it – let’s hear from some readers. Have you ever gone to your card provider to make a Section 75 claim? What was your experience? Let us know in the comments below.

You can see all The Treasurer’s articles in a dedicated archive.

{ 13 comments… add one }
  • 1 ermine July 19, 2021, 9:20 am

    S75 is good stuff. Probably also worth noting is don’t use Paypal for such purchases, even on a credit card because that also breaks the link. There are other subtle wrinkles, like I don’t think additional cardholders are covered when they make purchases on a card

  • 2 BillD July 19, 2021, 9:41 am

    Good article. I’m lucky to have never had to invoke the S75 support on credit card purchases. The PayPal point from @ermine is a good one. Also what if the seller uses an intermediary like Wirecard or Worldpay? I get some online purchases where it appears I’m paying with my credit card direct but it goes through one of these. I did take a chance with an online camera lens purchase on PayPal last year as the supplier used Wirecard for credit card transactions but is was suspended due to Wirecard fraud issues so they’d only take PayPal. I’d have gone to another supplier but they were offering a 10% discount with a voucher code..a risk vs reward decision!

  • 3 Genghis July 19, 2021, 11:08 am

    Another point to note is that under S75 the credit provider is on the hook for consequential loss.

    For instance, you book a flight to New York for £300 and the airline goes bust. Now the best price you can get is £600. The credit provider are joint and severally liable for the fulfilment of the contract and getting you to New York (at an effective cost of £600), not just for a refund (the £300).

  • 4 MM July 19, 2021, 11:53 am

    S75 is excellent. A lot of people don’t realise that it’s not just the purchase that is made that is protected, but you’re also covered for additional costs. A really great example of how this worked out is detailed in the Financial Ombudsman Newsletter here https://www.financial-ombudsman.org.uk/files/2921/86.pdf (See Page 8: 86/5 credit-card provider misunderstands the extent of its liability under section 75). On the FOS website there is also a listing of cases they rejected or upheld, to provide more real-world applications of legislation.

    As you point out, the consumer has nothing to lose, it is tightly regulated and used properly it can be beneficial in any tricky situation where a credit card is used. Frankly, I’m not sure how it still exists and why it hasn’t been lobbied away.

  • 5 DavidV July 19, 2021, 2:27 pm

    I used S75 back in around 2008 when Empire Direct went into administration very late on the day I had been waiting at home for my new washing machine to be delivered. Despite the administration being widely publicised in the news at the time, I had to jump through some hoops with Barclaycard to get my money back. They seemed to want a letter from the company (now in administration!) that they would not give me my money back or deliver the goods. Only when the administrators put a notice on the website to this effect that I was able to print off were Barclaycard satisfied. This was a cut and dried case but still presented some small hurdles. I can’t imagine claiming on S75 for damaged/incorrect camping equipment from a company overseas but still trading being very straightforward.

  • 6 Matthew July 19, 2021, 4:51 pm

    I believe that even if you only put £1 of a transaction on credit card that the whole transaction is covered. Put £1 of house and car purchases on them! What I’m not sure about is if you use multiple credit cards if they’ll all refuse saying the other ones can handle it. Also I’ve read that you could have many small items in a transaction which might mean you’re not covered – the items themselves have to meet the criteria – you could put £3k onto card for wedding meals but if they’re <£100 per meal you may not be covered.

    Also I don't think a say 40% interest rate is any more usary than credit unions charging 40-50% on unsecured loans, certainly better than overdrafts at least. It's even more of a Mickey take that credit unions 'only' charge say 10% on secured loans (borrowing your own savings!)

    But play your cards right and you won't have to pay 40% or anything like it.

  • 7 Andrew July 19, 2021, 5:08 pm

    I’m found American Express to be very good to following up on this. I complained to a travel agent after my flight was cancelled (by the airline) that I should receive a refund. They said they’d have to pass a cancellation fee on to me, despite their T&Cs stating if the airline cancelled the flight, I would receive a full refund. After some excruciating back and forth with the agency, I went to Amex. A quick form and several days later, I had all of my money back.

  • 8 weenie July 20, 2021, 10:45 am

    I bought V Festival tickets some years back from a ticket provider which mysteriously ‘disappeared’ and didn’t send me my tickets. Managed to claim back the full £350 with not a lot of fuss, just disappointment that we didn’t get to go to the festival that year!

  • 9 Jane in London July 21, 2021, 8:47 am

    Section 75 is, indeed, a wonderful thing for responsible credit card users!

    In the run-up to the 2008 EU consumer credit directive, credit providers had the opportunity to lobby government for the removal of Section 75 but, interestingly, did not attempt to.

    Jane in London

  • 10 Petepool July 22, 2021, 1:47 pm

    I’d endorse what you say about 3rd party purchases potentially breaking the link. Currently months into trying to reclaim for a faulty exercise bike purchased via Amazon paid with Amex. I’m still arguing about it but doesn’t look promising.
    I made sure the replacement was bought directly from a UK supplier.

  • 11 The Treasurer July 23, 2021, 10:05 am

    Thanks for all the kind comments. It’s really interesting to hear that many of you have benefitted from the power of Section 75.

    @ermine. It was often said that to qualify for S.75 protection you shouldn’t pay with PayPal as it breaks the link between yourself and the card provider.

    However, I believe this is no longer 100% accurate. That’s because there are some online anecdotes suggesting you can argue that your payment via Paypal constitutes a ‘commercial entity agreement’ which would make you liable for the protection. However, I recognise that it’s probably best to avoid using a third-party payment service if you can.

    Interestingly, the Financial Ombudsman has said that it will look at cases where S.75 protection has been refused because PayPal has been used. It’s also worth knowing that PayPal has its own buyer protection, which is something half-decent to fall back on.

  • 12 Chris July 23, 2021, 10:54 pm

    That’s a very interesting article.

    Is Apple Pay (linked to my credit card) also considered an third party service and would pose the same issues as Paypal?

    In that case, the best thing to do is to pay directly with the Credit card (and skipping Apple Pay) items/services for which I want the protection?

    Thank you

  • 13 Gentleman's Family Finances July 31, 2021, 9:30 am

    I have ways (like many of us) had a deep suspicion of credit cards and in 20 years have never ever paid interest on borrowing (other than perhaps stoozing fees).
    One advantage of credit cards us that you can get cashback (yes) and also it eases cashflow.
    If my average monthly credit card balance has been £1000 on say an average 45 days payment, and my investments have returned on average 10% return, my 20 years of fantastic plastic have earned me over £9000 in wealth.
    The flip side is that £1000 in debt at 19.9% Apr over 20 years is now over £37,000 – that’s a good way to compound your early problems and mistakes.

    Debt is a bad thing but credit doesn’t need to be.

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