Credit card protection explained

When you use your credit card to buy things that cost between £100 and £30,000, you get additional purchase protection if the product is faulty and the retailer won’t fix or replace it, or if the goods are not delivered because the merchant goes bankrupt.

This purchase protection lets you get a full refund from your credit card issuer – even if you only used your credit card to pay for part of the purchase. If you use a credit card to pay a £50 deposit on an armchair that costs £500, you would receive full purchase protection.

How much does credit card purchase protection cost?

This protection, which is enshrined in UK law, and which might be very expensive in other circumstances, is free with every credit card. Whatever type of credit card you get, from bad credit to travel to balance transfer cards, you won’t be charged extra.

Credit card protection is incredibly powerful, and it can help you out in many situations – but only if you follow the strict rules governing it. For example, a bicycle with mudguards costing £119 would be eligible for protection. The same bicycle would not be covered if you paid £99 for the bicycle – and then paid £20 separately for the mudguards. The total purchase price would be the same to you, and you would receive the same goods, but the law is very specific: any single object with a total purchase price below £100 does not qualify.

Why do credit cards offer purchase protection?

Funnily enough, the purchase protection offered by credit cards has very little to do with credit cards. When the Consumer Credit Act was enacted back in 1974, credit cards were nowhere near as popular as they are today.

Before the Consumer Credit Act, the goods you purchased and the credit used to buy them were distinct and separate. This meant that you were legally liable for debt repayments even if the goods were faulty, or if they never even arrived due to the vendor going rogue or bankrupt.

Section 75, the specific section of the Consumer Credit Act that created the purchase protection we enjoy today, established a direct link between the goods supplied and the credit used to purchase them. This means that you can hold your credit supplier directly liable for issues with products – as long as the total purchase price was above £100 and below £30,000. It also means that you don’t have to make ongoing credit payments for faulty products.

Enhanced purchase protection

Some ‘premium’ credit cards offer enhanced purchase protection. This protection is in addition to Section 75 protection and often enables you to claim purchase costs back from your credit card issuer if something is lost or stolen.

Unlike Section 75 protection, this enhanced protection tends to be time-limited (usually around 90 days) and only protects you when you have no alternative protection – you can’t use it to claim for things stolen from your house if you have a home contents insurance policy. That said, it often covers goods costing less than £100, so it can be a valuable addition.

Extra credit card protection

Aside from the credit card protection detailed above, some credit cards also offer you free identity theft cover, which protects against credit card debt created in your name – if your personal information somehow falls into the hands of someone else.

When does credit card protection not apply?

To gain the protection of Section 75, your purchase must be directly linked to a line of credit – as it is with credit cards.

There are some not-so-obvious exclusions to watch out for, though. For example, if you make a credit card payment through a third party processor like PayPal, or you buy a product through a distributor rather than directly with a supplier, you might not be covered by Section 75.

Many payment processors offer alternative protection to their users, but these rights are not enshrined in law, can be revoked, and are not as powerful as Section 75.

Equally, debit cards don’t offer Section 75 protection – instead they’re protected by something called chargeback.

Debit card protection through chargeback

Chargeback lets you reclaim the cost of purchases from your bank if something fails to arrive or a service you have paid for is not provided. This means you do have some recourse if things go wrong with debit card and smaller credit card payments (less than £100), but you’ll need to claim within four months. For larger purchases, it might be worth using the stronger protection offered by a credit card.