Great News For Cardholders

A vital victory in the House of Lords means that Brits can use their credit cards abroad with renewed confidence. Hurrah!

Credit cards: love them or hate them, you have to admit that they are incredibly useful and convenient. Indeed, they are so popular that there are more credit cards (75 million) than there are adults in the UK (48 million). In other words, there are more than 1½ cards for every British adult, so we're pretty fond of our flexible friends.

Given that credit-card usage is so widespread, it's vital that cardholders learn how to get the most from their plastic. For instance, if you learn the rules of this complex card game, then you can borrow money without paying interest (using a 0% card), get paid to spend (with a cashback card), and borrow at ultra-low rates for life (with lifetime balance transfers).

As well as learning how to use your card sensibly, it pays to know your legal rights when paying by plastic. For example, if you buy something using a debit card, and the supplier goes bust before your goods arrive, then you're up the proverbial creek without a paddle. On the other hand, if you pay by credit card, then you enjoy a legal right that usually saves the day.

Allow me to explain. Under Section 75(1) of the Consumer Credit Act 1974 (alias `s.75'), buyers of goods on credit enter into what's known as a `debtor-creditor-supplier relationship'. This requires the provider of credit to `stand in the shoes of the supplier'. Hence, if goods fail to arrive, are damaged or faulty, or don't meet their description, then you can pursue the lender for breach of contract, as well as the retailer.

Of course, there are limitations to the extent of this protection. Under s.75, each item costing between £100 and £30,000 is covered. In order to take advantage of s.75, you must pay for some or all of the goods using a finance agreement, such as a credit card. So, even a £1 credit-card deposit on an item costing £10,000 gives you the right to pursue your card issuer if things don't work out.

As you'd expect, s.75 costs credit-card issuers money -- hundreds of millions of pounds a year, in fact. Hence, they looked for loopholes in this legislation, and claimed to find one when they alleged that goods bought overseas or from non-UK websites fell outside of this protection.

Last year, in Two Crucial Credit-Card Changes, I cheered the news that credit-card issuers had lost their legal challenge to s.75 in the Court of Appeal. Unhappy with this verdict, the card issuers took their case for a ruling by the House of Lords. The terrific news for cardholders is that five Law Lords upheld the Court of Appeal's decision, ruling that s.75 does indeed apply to foreign purchases. So, it's hard cheese to challengers Lloyds TSB and Tesco Personal Finance and other card issuers, and three cheers for cardholders!

Finally, we Brits use our credit cards to spend as much as £12 billion a year abroad and on foreign websites. Therefore, with credit-card issuers forced to support consumers over foreign suppliers, it's up to the card firms -- not the public -- to pick up this particular bill. Thus, we can expect grumpy card firms to announce additional charges to make good this loss sometime soon, agreed?

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