Play your Credit Cards with care online

  anchor 15:10 02 Oct 2006
Locked

from the Daily Telegraph: 16/9/06

Now that more of us than ever before are buying goods and services online, it is important to consider what protection there is – if any – for different methods of payment.

There are big differences in what you can expect in the way of help from the various banks, building societies and credit card companies. Under the Consumer Credit Act, section 75, credit card providers are "jointly and severally" liable with providers of the goods you are buying. In simple terms, that means the credit card companies have to ensure you are compensated if the supplier goes bust or the items purchased are either not delivered or are not as specified.

These rules cover all purchases made worth more than £100. But there is a "get-out" clause that any claim can only be for the cardholder's personal loss. So, for example, if you paid for several people's holidays in one transaction, you might only be covered for the cost of your own holiday.

Things can become more complicated where you use your credit card to buy items but the transaction is carried out through an internet-based payment service company, such as Paypal. Sandra Quinn of Apacs, the payments trade association, said: "The legal position is that the credit card company is transferring the money to the payment service company and it is they who are handing it to the organisation providing the goods or services. So the credit card company would only be legally liable under section 75 if there was a problem with the payment service company.

"However some card issuers will follow up claims on behalf of customers. If you plan to use your credit card for these sort of transactions, you should check out your issuer's stance."

Paypal has worked hard to improve its offering to customers. It has a charge-back service so credit card companies can reclaim money if there has been a problem with the end supplier. Banks, building societies and credit card issuers always say that the customer must first try to sort out the problem with the supplier before involving them. The question is whether, if you failed to solve the problem personally, they would use the charge-back system available and how far they would go on behalf of customers.

  anchor 15:14 02 Oct 2006

Research by the Telegraph shows many providers either stick to the strict legal position or they have been unwilling to give us an assurance that they would use the charge-back system offered by Paypal. They include: Citibank, Clydesdale, Egg, Goldfish, Leeds Building Society, Morgan Stanley, Nationwide, Post Office and Yorkshire Bank. All the other major credit card issuers said they would reclaim customer's money in the case of a valid dispute.

If you are using a service other than Paypal you may encounter difficulties in getting help from most credit card providers. M&S Money said: "Paypal enable us to chargeback from a supplier's bank, so that is the system we use. However, we do not treat purchases made via other payment services as a standard purchase because the transactions are related to the transfer of money and not the purchase of goods."

Because there is no "credit" involved in the use of a debit card, purchases using debit cards are not covered by the Consumer Credit Act and therefore Section 75 does not apply. However, the rules governing Visa debit cards allow banks, on behalf of their cardholders, "to seek financial redress from the merchant's bank if the cardholder has bought goods or services that will not be delivered, for example when a merchant ceases trading."

Similar arrangements are available with some other debit cards but the following providers said they would be unable to provide a charge-back facility: Bank of Ireland, Clydesdale, First Direct, HSBC and Yorkshire Bank.

HBoS which issues Bank of Scotland, Intelligent Finance and Halifax branded debit cards, said: "Our policy is to investigate any claim that a customer makes where they have been unable to resolve a problem directly with the retailer." It said the aim would be to refund the customer.

HBoS said: "We make hundreds of such refunds every month. We want our customers to feel secure about using their credit and debit cards, although we would still urge sensible caution - including checking out any company you are dealing with over the internet."

Security checklist:

When buying anything, whether online or on the high street, paying by credit card gives you extra legal rights if something subsequently goes wrong with your purchase.

Paypal offers more protection than other online payment systems because the company has both an internal disputes system for purchases worth up to £500 and a charge-back "safety net" arrangement where valid claims are made by credit and debit card issuers

The following credit cards told the Telegraph they will support a valid claim by using the charge-back system offered by Paypal: American Express, Barclaycard, Bank of Scotland, Britannia, Capital One, Co-op, First Direct, Halifax, HSBC, Intelligent Finance, Liverpool Victoria, Lloyds TSB, Marks and Spencer, MBNA (including various charity and other affiliated cards), Mint, NatWest, Northern Rock, Norwich & Peterborough, RBS, Saga, Sainsbury's, Smile, Tesco, Virgin and Yorkshire Building Society

Using payment service companies other than Paypal may leave you having to pursue redress with no support from the credit card company.

The following debit cards will support a valid claim by using charge-back systems for all purchases: Abbey, Alliance & Leicester, Bank of Scotland, Barclays, Citibank, Co-op, Coventry Building Society, Halifax, Intelligent Finance, Lloyds TSB, Nationwide, NatWest, RBS and Smile.

All card issuers suggest you should try to sort any dispute out with the provider of the goods or services before taking the matter up with them. Unfortunately, in practice, some are still not helpful even when you have done this. If a card company is not helping you in the way they have indicated they will, please contact The Telegraph at money @ telegraph. co. uk

  Stuartli 17:32 02 Oct 2006

I've pointed out in the forums on a number of occasions that Halifax's Visa debit card carries very similar safeguards to that of credit cards.

It should be noted that not all HBOS debit cards are Visa - my last one was a Switch version.

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