How safe are credit cards?

  dendrite 23:27 28 Dec 2004

I’ve never owned a credit card, but as I was planning to make a number of sizeable purchases over the internet I decided to get one for the purchase protection rather than the credit. My bank is Lloyds TSB. I filled in the application form for a Lloyds TSB credit card and took it into my local branch. I asked the man on the desk to confirm there was protection for purchases over £100. He looked at me as if I’d walked into a temperance hall and ordered a whisky and soda. He didn’t know anything about purchase protection. He said credit cards gave some security in that should a retailer cease trading the credit card company would be higher up the pecking order of creditors than an individual purchaser and in that respect Lloyds TSB might be able to recover my money; but he was insistent that when I made a purchase using the card the contract was between me and the retailer and the risk was mine. I wasn’t convinced and he went to consult an important looking chap in a glass office. This man came out and confirmed what the first had said, and pointed out some small print on the application form which said that in the event of goods not arriving, I had the option of suing Lloyds TSB – hardly practicable. I’ve read all the small print now and I have to admit there’s nothing about purchase protection.....but I’ve read numerous articles that say credit cards offer protection in the event of the retailer ceasing to trade. Have I completely misunderstood the system?

  Forum Editor 00:04 29 Dec 2004

is that you aren't spending your own money - you are effectively borrowing it from the Card provider on the understanding that you'll pay it back in instalments - if not all in one go. When you use the card to buy something you're topping up your loan, but it's the card provider who is paying the retailer - that's why the whole system works. No retailer would sell you goods on the basis that you would pay for them later, but that's what happens when a credit card sale is made - the retailer trusts the card provider to pay, and the card provider trusts you to repay the loan.

If you buy goods using a credit card (not a debit card) or the retailer has arranged credit with a finance company on your behalf, section 75 of the Consumer Credit Act of 1974 provides protection, as long as the price of the item was over £100. This is the case even if you have only paid a proportion of the cost using a credit card - a deposit for instance.

When you use your credit card to make a purchase of goods or services over £100 the card provider becomes equally liable with the retailer for breaches of contract, or misrepresentation. If a retailer you had purchased from ceased to trade for instance, you would look to the card provider for compensation under section 75 of the Consumer Credit act of 1974, although you would be expected to contact the trader in an attempt to obtain recompense first. In such circumstances you should write to the card provider to say that you wish the matter to be noted as being 'in dispute' and tell them that you would look to them for compensation if you don't obtain satisfaction from the retailer.

Does that help?

  beeuuem 00:06 29 Dec 2004

The Credit card company has equal liability under section 75. It is as if they had sold you the goods you bought and you have the same rights against them as the actual supplier .
If ,as your example, a trader ceases trading before you receive your order you can claim the money back from the Credit card company as long as it is within the specified limits.

Under Section 75 of the Consumer Credit Act 1974 ("CCA"), where a consumer purchases goods or services for a cash price exceeding £100 and less than £30,000, on a credit card and has a claim against the supplier in respect of a misrepresentation or breach of contract, he has a "like claim" against the creditor, that is the credit card company.
See click here

  dendrite 00:19 29 Dec 2004

Thanks for the reassurance, Forum Editor and Beeuuem. I looked at the egg website and they explicitly state there is purchase protection over £100. On this basis I have applied for an egg card. I still can't understand the Lloyds TSB situation. The men I was talking too weren't spotty kids. The small print in the Lloyds TSB application does mention the 1974 Consumer Credit Act so I'd have thought their credit card was issued on the same basis as everyone else's.

  Forum Editor 00:50 29 Dec 2004

It is.

Lloyds TSB are subject to the law in the same way as is any card provider. Methinks it's time for some staff training.

  TomJerry 02:38 29 Dec 2004

just put into my list

  acein1 10:24 29 Dec 2004

maby a bit late with this if you allready got a c/c,anyway ,if you intend to use the card mainly on the internet,it would be worth considering an a/c with "cahoot",part of abbey /national,with them you can use their "webcard",which generates a random number every time it is used,(not your actual card number),you can also put a maximum ammount to pay "example" purchace price £29.95,maximum payment £30, hope this helps

  bfoc 19:19 29 Dec 2004

That the staff thought you were talking about post-purchase protection which some cards (used to?) offer. This can include such things as damage insurance.

When they said about sueing Lloyds TSB they were stating what might have to happen if they did not accepy liability. However if you meet the conditions under section 75 you would win the case and it would probably never get to court!

Agree about staff training though!

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