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Section 75: A Very Advantageous Piece of Legislation for the Average Consumer

27th December 2010

One topic of concern in the aftermath of the recession is financial protection. Many companies went bust in the downturn, and when this happened, lots of customers lost large amounts of money in payments they had made to that company that didn't deliver. These days, consumers have something else to consider other than what products to buy: whether paying in advance will be secure.

Luckily, there is a way for consumers to get some financial protection through their credit card company. A little piece of legislation that until recently has been widely unknown (and hushed up by the banks) is section 75 of the 1974 Consumer Credit Act. The Act states that if something goes wrong with a purchase made on a credit card, the credit card issuer is liable. This legal protection makes the banks responsible for anything that goes wrong valued between £100 and £30,000.

So if, for instance, you pay for holiday flights on your credit card, and the flight company goes bust, you can claim the money back from your credit card company. Even if you only make a partial payment, you are still covered for the whole payment (up to the value of £30,000). Therefore if you were to make a deposit of £100 on, say, a £9,000 car, you could claim the whole £9,000 from the bank.

Many banks may try to avoid paying the money by claiming you have to go elsewhere - for example, the company you bought the good or service of. This is incorrect. You are able to make a claim straight from them, in the form of a letter, providing evidence of what has happened.

Not only can you make claims when companies go bust: you can also claim if your product is not delivered, it is faulty or you received the wrong item. It is often a lot easier to deal with your bank than the company that provided you with the goods in cases like these.

This legislation makes using your credit card to make large purchases very advantageous. The legal protection you gain against potential losses should not be undervalued in this day and age: it is very important. As we are emerging from recession, companies are still at high risk of going bust. You never know when this might affect you, so always use your credit card for financial protection to be on the safe side.

There is a trap you could fall into when using a credit card to make a large payment: high interest charges. It is essential you pay the money you owe from the purchase off as soon as possible to avoid paying a lot of interest. Setting up a direct debit and connecting it to your credit card account will make this quick and easy.

Section 75 financial protection is only available on credit cards (and store cards, although these should be avoided because of their typically high APR rates). Debit cards, paying in cash or using cheques will not protect you. If you don't like the idea of using your credit card to make a large purchase, see if you can pay just part of it on your credit card - as long as you pay at least £100, you will be protected.

Don't be put off claiming from major high street banks; of course they don't like this legislation and will try to avoid it, but it is there to protect you, so make full use of it. Times are turbulent in the financial world - don't get caught up in the trouble.