Two Crucial Credit-Card Changes!
A favourable Court ruling is terrific news for all credit-card users, but there's bad news for online gamblers who bet on plastic.
Ladies and gentlemen, if you have a credit card, please join me in a toast to Court of Appeal Judges Lord Justice Waller, Lady Justice Smith and Lord Justice Moore-Bick!On Wednesday, 22 March, these three Judges made an important ruling which provides better safeguards for credit-card users. Let me explain why:Section 75 of the Consumer Credit Act 1974 (Section 75) provides you with a valuable legal right when you buy goods or services on a credit card. If you buy something costing between £100 and £30,000 on a credit card (but not a debit card), you can claim against your card issuer if something goes wrong. What's more, even if you've only paid a deposit of, say, £1 on your credit card, you can claim a refund of the entire cost of the goods.So, if goods are damaged, faulty or don't turn up, or the supplier goes bust, your card issuer wears the supplier's shoes and must make good your loss (under what's known as a debtor-creditor-supplier arrangement or connected lender liability). This explains why I always use my credit card to pay for expensive purchases (plus I get cashback as I spend, too).Alas, in November 2004, three credit-card issuers -- American Express, Lloyds TSB and Tesco Personal Finance (a joint venture with the Royal Bank of Scotland) -- went to the High Court to argue that Section 75 does not apply to transactions outside of the UK, contrary to what the Office of Fair Trading (OFT) believed.The OFT lost its case, so it appealed to the higher Court. Happily, the OFT won in the Court of Appeal, with the Judges overturning the High Court ruling by confirming that Section 75 does indeed cover overseas purchases. This is great news for cardholders, because we Brits spend about £10 billion abroad each year on credit cards, plus we are increasingly using credit cards to purchase goods from foreign websites.Hence, all credit-card issuers must compensate customers for foreign transactions which go wrong, so if you've had a foreign Section 75 claim turned down, ask your card issuer to review your case without delay. However, the game isn't over yet, as Lloyds TSB is considering an appeal to the House of Lords, so there may be one final chapter to this story!Now for the bad news for a somewhat smaller group of credit-card users: card firms are beginning to crack down on punters who use their plastic to bet on online gambling websites. Until now, card issuers have treated these transactions as purchases, but the industry is now moving to treat these payments as cash withdrawals.The upshot of this is that online gamblers who fund online betting accounts using credit cards will be hit by higher rates of interest (sometimes in excess of 30% APR), plus cash-advance fees, typically 2% with a minimum charge of £2. What's more, there is no initial interest-free period for cash advances (usually, it's between 45 and 59 days for purchases), so gamblers will start paying sky-high rates of interest from the date of each transaction.Clearly, by stacking the odds in their favour and making gambling on credit more expensive, card companies are making life harder for online punters. For the record, Egg is changing its terms and conditions for its three million cardholders with effect from 1 April, and Royal Bank of Scotland (eleven million cardholders) makes this change on 1 May. Expect more companies to follow suit (pun intended) in the weeks to come!Hence, my advice to online gamblers would be to fund your betting account using your debit card or one of the many e-wallet services. Actually, unless you're a really skilled player, my advice would be to avoid online gambling altogether! For example, leading online poker firm PartyGaming made a pre-tax profit of $584 million in 2005, all of which came from -- you guessed it -- online punters' pockets!Personally, my response to the boom in online poker was to buy shares in Empire Online when they crashed last October, which has since risen by a third. That's more money than I'll ever lose playing the occasional poker tournament in my local pub (I finished 3rd out of 31 players last night)!More: Dodge interest with a 0% credit card | Earn up to 2% cashback with a Best Buy card!Cliff owns shares in Empire Online and Lloyds TSB.