Credit card protection

Nine times out of ten, you'll buy an item and be completely happy with it. But occasionally something might go wrong along the way. When this occurs, any damage or mistakes will usually be sorted out by the seller. But what if they refuse? What if they go bust or just disappear? What if the item gets lost or is stolen?

It can sometimes be a battle for the unwary shopper, but you can think of a credit card as your little plastic shield. A host of free benefits offer increased protection and make them one of the safest ways of paying.

The joy of Section 75

We can mostly attribute the extra protection a credit card affords to Section 75 of the Consumer Credit Act. The upshot of this little clause is that your credit card company is jointly liable if something goes wrong with a product or service you've paid for by credit card. That doesn't apply if you use a debit card.

This means your credit card company shares equal responsibility with the retailer or trader for the goods or service supplied. You can also potentially claim for any breach of contract or misrepresentation by the company from which you've bought your goods.

So if for any reason the merchant isn't playing ball, you can apply for a refund from the credit card company instead.

Don't sweat the small stuff either

Section 75 unfortunately doesn't cover items that cost less than £100. But you may be able to make a claim on lower priced goods via a scheme called chargeback. It's not a legal requirement, but some financial providers offer it under what's known as Scheme Rules. Offering a basic level of protection is generally regarded to be good banking practice and chargeback can be applied to both credit and debit card purchases.

There can be some variation between how different banks and credit card providers handle chargeback. However, if you want to make a claim on this scheme, you must do so within 120 days of buying the goods or services. Be sure to ask your credit card provider how they operate the scheme and how you can apply for a refund under it.

Other protection

All of the protection detailed above is free and automatic when you use your credit card. However, your credit card provider may offer you additional insurance for an extra price. You will need to review the policy benefits and terms and conditions closely to see if they have any value for you.

Purchase protection insurance

Not to be confused with PPI (Payment Protection Insurance). As we know, you're already protected under Section 75 when something goes wrong when buying goods or services. However, what if something happens to the item after you've bought it and begun to enjoy it?

It covers goods paid for with your credit card against loss, theft or accidental damage - usually for around three months after purchase. As with any insurance, there are limitations and exclusions, so it's important to check the full policy details before relying on it. These tend to revolve around maximum claim amounts and the nature of the item that's been lost, damaged or stolen. For instance, commonly excluded items include perishables, vehicles (and items left in them), jewellery and electronics.

What can be covered, and the period from the date of purchase that it will be covered for, does vary between credit card providers. So always check the policy before you opt for this extra insurance. Remember, if you have home contents insurance, you're probably already covered.

Refund protection and purchase delivery protection

Some credit cards offer two extra forms of insurance. Refund Protection covers items when the merchant refuses to give a refund when they should do and Purchase Delivery Insurance protects you if an item isn't delivered to your door or is lost en route. However, it could be argued that you are already covered for these scenarios under Section 75. Paying an extra premium for this may not be necessary, always read your terms and conditions.