Consumer Rights – What’s The Best Way To Pay?
Credit Cards are better than debit cards
This may surprise you, but you have more rights if you spend on a credit card than you do on a debit card, cash or cheque. Now don't rush to put everything onto a card costing a fortune in interest, but do consider some planning for the best of both worlds.
This option is really only for those who have no debts or can at least pay a specific card off in full each month, that way there's no interest charged, so you can get the benefit of extra rights without any cost (there are other benefits too such as earning cashback, cheaper spending when abroad, special protection for web spending and ID fraud protection too)
Section 75 of the Consumer Credit Act
Basically, when you use a credit card you are protected by the Consumer Credit Act. When you spend on a credit card, you're effectively entering into an arrangement to borrow (even if you pay off in full) then you get these rights, and this is why you don't get the same rights with debit cards.
The Core Rule is if you pay for goods worth over £100 even partially on a credit card then the credit card company is equally liable with the retailer. That means if you have a problem such as non-delivery of goods, or with any of your above statutory rights, then you can go straight to the credit card company rather than the retailer. This is often extremely useful, as the retailer may have gone bust, or be being obstructive.
Recently it was challenged in court that this protection didn't apply if you're buying goods abroad, yet the Court of Appeal upheld consumers' rights. So buy abroad and you're protected. That means, if something goes wrong with a good bought abroad, you can simply make a claim directly against the credit card company, without contacting the foreign company.
What about Debit Cards?
There is no statutory protection, but both Visa and Mastercard allow their member banks a dispute proceedure called 'chargeback'. This effectively allows your bank to ask the bank of the company you made the purchase from to get the money back.
How chargeback works
Complain to your bank not more than 120 days after you realize that your goods won't be delivered and the transaction can be disputed. Your card issuer can then claim the money back off the merchant's bank. It's worth noting many bank staff don't know about this procedure, so you may need to explain it do them (also remember this is only for Visa or Mastercard Debit cards).
At this point the onus is on the acquirer bank (i.e. not the company but its bank) to get the money back in a transaction that hasn't been adequately completed.
How chargeback compares to Section 75 protection
This is nowhere near as strong as the section 75 consumer credit act protection, but there is a chance if you start procedures this way you can get all your money back. It's more likely in non-delivery of items, but also possible where the company has gone bust.
The key difference is that when you complain on a credit card under section 75, the credit card company itself is legally liable, with the chargeback it's just about the Visa/Mastercard process and that is no where near as weighty plus you can't go to court.
