Every now and then we mention Section 75 with reference to the protection credit cards offer consumers, but what is it? Well, being the diligent money savers we know you are you’ve probably been reading up elsewhere on the intricacies of the Consumer Credit Act, but in case you haven’t (or you’ve only read what you want to hear) we’ve pulled together a quick Savvy Shopper guide to our favourite Section.

What is Section 75?
Section 75 means that the credit card provider must protect any goods you buy for over the value of £100 completely free of charge because they have equal responsibility with the retailer. This law, implemented in the 1970s, applies when you spend between £100 and £30,000 on a credit card.

“75. — (1) If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor.”

Why does Section 75 exist (A history lesson)?
Prior to the enactment of Consumer Credit Act 1974, legislation covering consumer credit in the UK was disjointed and piecemeal. It focused on specific areas of credit and lending rather than taking a holistic view of the credit industry.

In 1971 Lord Crowther (fresh from advising the government to raise the school leaving age to 16) was commissioned to advice on UK consumer credit law. His Committee on Consumer Credit advised for the need of sweeping changes; the abolition of previous legislation and the harmonisation of credit legislation hence forth. As part of these reforms, and largely to protect against unscrupulous hire-purchase operators, “The Crowther Committee also suggest that defective goods bought under a loan agreement linked to purchase should become the responsibility of the lender.”

In presenting the bill to Parliament Baroness Phillips drew attention to cases highlighted by the Daily Mirror in 1973 where “…families had bought home freezers. Before these appliances were even delivered the firm supplying them had collapsed. The unfortunate clients then discovered that they were committed to pay for the next three years, under a moneylender’s agreement, for articles which they had never received.”

Despite the general election in 1974, the Consumer Credit Act passed quickly through Parliament thanks to support from both the minority Labour government and the opposition, coming into law on 31 July 1974 and we’ve had Section 75 ever since.

What can I buy?
Absolutely anything. It doesn’t matter whether you are booking a holiday, buying a computer, or ordering a new kitchen. As long as the value of the goods is between £100 and £30,000 and purchased using a credit card you should be protected under Section 75. However, sometimes it isn’t quite as simple as this as you will find out below.

When can I put it to use?
Technically, Section 75 can be applied when a supplier breaches the contract with the consumer, generally when they have failed to meet the Sale of Goods Act.

In times of economic uncertainty there are stories of companies going bust left, right and centre, particularly in the travel and holiday industry. However, if you are paying for your goods with a credit card, you don’t need to worry about losing your cash as the credit card provider have to give you a refund.

Section 75 doesn’t just come into use when businesses go bust, it provides the same legal protection if you have received faulty goods, they are not as described, or your goods have simply not been delivered. If the value of the goods was more than £100 and paid for with a credit card, the credit card company is equally responsible for the breach in contract as the supplier.

This amazing piece of consumer protection gives you the right to receive a refund within 6 years in England, Wales, and Northern Ireland, and 5 years in Scotland. What’s more, you don’t even have to have paid the full amount on your credit card to receive a full refund as part payments are covered by the Act.

For example, let’s say you buy a car worth £5,000, £10,000, or even £29,999, and pay the initial deposit on your credit card. If there was a problem with the purchase, or the company went bust, you could claim the full cost of the car under Section 75 even though you only spent £100 on your credit card.

Remember: always keep your receipts as well as credit card statements to make any potential claims easier.

Although credit card transactions are the most common things to be claimed back under Section 75, it does also provide protection for store cards, hire-purchase agreements, and in some cases other credit agreements such as car loans.

Since 2007 the same protection applies when goods have been purchased abroad as the House of Lords ruled that the Act did not have any limits on territory, and therefore goods from foreign suppliers would also be covered by Section 75.

What doesn’t it cover?
Although Section 75 of the Act might sound like a piece of protection that can make you invincible, it does rely on a direct relationship between you and the credit card provider. If there are any additional steps in the buying process, Section 75 might not apply. Here are some examples of when you might not be covered under the Consumer Credit Act 1974.

Third parties
If you are using a payment system to complete the transaction (PayPal, WorldPay, Google Checkout) there is not a direct relationship between you can the credit card provider. It is important to consider the likelihood of anything going wrong when adding a third party, as although PayPal does offer protection to its buyers, it is not as effective as Section 75. Using third party payment systems is not always a bad idea as they often offer additional protection for purchases under £100.

Travel agents
Booking a holiday is usually a huge expense and so is often booked with a credit card, but if you have paid for your trip via a travel agent you might not be covered under Section 75. In this situation the travel agents are classed as an obstacle between you and the credit card provider. If this has happened to you, it is worth checking out who owns the travel agent and whether you paid the airline directly or not. This information could give you a chance of claiming.

Additional Cards
If you’ve got additional cards on your account for spouses, partners or children etc, the purchases they make might not be covered under section 75. If they have made a purchase that have faltered and you want to claim under section 75 you will need to demonstrate that the purchase provides a benefit to the you as the primary cardholder. So what is benefit? A lovely birthday present would probably qualify, but the pair of Jimmy Choo’s your daughter has bought for herself are unlikely to qualify (no matter how much joy you get from seeing her smile whilst she’s wearing them!).

The Saavy Shopper
So now you know the ups and the downs of Section 75 you should be a Saavyer shopper. Of course you need to follow the rules to get the benefits, but if you do it could be the best perk you’ve ever had. Happy Shopping!

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No one can deny that 2011 was, in many respects, one the toughest ever years financially for people, businesses, and governments around the world. However, it also saw consumers benefit from some of the longest interest free balance transfer periods on credit cards ever seen, the new Consumer Credit Directive change the balance of payments hierarchy for everyone benefit. So given the mix of tasty fruit and banana skins 2011 offered we thought we’d look into our crystal ball to give our view as to what 2012 might hold for UK personal finance.

Double Dip Recession?
The main thing everyone wants to know is whether the UK will slip back into another recession and there are as many answers are there are experts on the subject. Our answer is, “possibly” – although don’t quote us on that! Yes, you want more information than that but it’s impossible to give a definite answer. Some analysts are predicting that whilst the Eurozone may end up in recession, the UK could come out of it relatively unscathed. Whereas others believe that the UK will be just as badly affected, as things will get worse before they get better, with the second dip being even tougher than the first in 2008.

Either way UK personal finances are more likely to be affected this year by Government cuts and public sector job losses. The private sector is not in a position to pick up the pieces and even if it were it would be questionable whether private sector wages would match Inflation, which rose to a record high towards the end of 2011. Although it is thought that this will decrease throughout 2012 it will continue to put pressure on households to tighten their belts and get more finance savvy.

Personal Debt
The total UK personal debt decreased by 0.02% to £1451bn from October 2010 to October 2011 and the average household debt decreasing by just less than 7% to £7,984 (excluding mortgages). The average consumer borrowing on credit cards and other forms of unsecured finance also decreased, down to £4,226 per average UK adult. Despite this slight decline in the amount owed by UK consumers, the Office for Budget Responsibility (OBR) still predicts that household debt will increase to £1823bn by end of 2015, and £2045bn by Q1 2017.

These statistics from Credit Action coupled with the fact that three in ten of us decided to go overboard and plunge into debt for Christmas and New Year, make it look likely that personal debt will deepen further into 2012. Research has shown that it takes most of us around six months to pay off Christmas debt, with 8% of us still struggling with it 12 months later. So, it looks like 2012 will be just as tough on our wallets as last year. Ouch!

The Housing Market
The figures published at the end of 2011 suggested that house prices were on the rise as did the gross mortgage lending reported by the Council of Mortgage Lenders (CML). The CML went on to say that it did not know what to expect for the remainder of 2012 as economic uncertainty was expected to widen. However, there is some good news for mortgage holders though as the Bank of England base rate is expected to remain at 0.5%.

Savings & Investments
If predictions are correct and the Bank of England base rate does stay at its record low for some time, savers could struggle to see the benefit. On the plus side inflation is expected to fall, which is good news as the value of your savings should at least stay intact. Due to the poor savings climate it is more important than ever that you take full advantage of your ISA allowance.

Finance Bill 2012
One of the most important things on the 2012 agenda for personal finance is the Finance Bill 2012. The draft legislation for consultation was released by the Government in December, and is expected to be published after the Spring 2012 Budget in March.

There are a number of changes on personal tax, corporate tax, and charities included in the Finance Bill 2012, a summary of the draft legislation is below.

Personal Tax
• Income tax thresholds and rates will be updated
• Details of the 50% tax relief scheme for SMEs (Seed Enterprise Investment Scheme) will be unveiled
• Statutory resistance test delayed until 2013
• Inheritance tax nil band and capital gains tax exempt amount to increase with RPI from 2015/16 and 2013 respectively

Corporate Tax
• Main corporation tax rate to reduce to 24% in 2013
• Improvements to Research & Development tax relief for SMEs
• Easing of conditions relating to real estate investment trust
• Bank Levy to increase to 0.088% from January 2012
• Changes to UK accounting practice

Charities
• Tax liability reduction
• Rate of inheritance tax to decrease to 36% when 10% of an estate is left to charity
• Withdrawal of Self Assessment Donate Scheme in April 2012.

What can I do?
With all the uncertainty it is tempting to simply shrug our shoulders and say, “…it’s out of my hands.” but that’s not the case. Worry about your little bit. If you can get you finances ship shape when everyone else is struggling there will be opportunities. Perhaps a bigger house, cheaper stocks & shares, bargains in the shops, but you’ll need to be in control of your finances to take advantage – Anything else is simply an illusion.

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Your credit limit is the amount of borrowed money you have to spend on a credit card; this amount is set by the card provider when your application is granted. The credit card company will usually have a minimum and maximum credit limit, but your limit will be decided based on your credit score. Your first credit limit is often a provisional limit which may be increased in the future.

Setting credit limits

When you apply for credit the lender will score you from its own scoring sheet, as each lender will have different requirements from its customers. This means that if one company provides you with a small credit limit, another may offer you a much larger one, and does not necessarily mean that you have a bad credit rating.

Credit card companies will consider many factors when setting your credit limit. These include your other outstanding debts on credit cards, your payment history and the amount of credit you currently have available to you. Since the credit crunch hit, it has been much harder for customers to increase their credit limits or get offered high initial credit limits as the government are pressing for companies to lend responsibly.

Provisional credit limit

Most of the time lenders will set new customers a provisional credit limit until they are satisfied that the borrower is responsible enough to manage a higher limit. If you use your credit card wisely in the first three to six months, you might find that you are offered a much higher credit limit without asking – this is known as an unsolicited (i.e. you didn’t ask for it) credit limit increase and is something that the government are trying to prevent.

There are no credit card regulations around credit limits, although the UK Cards Association published best practice guidelines for credit card limit increases in January 2011, which said:

“The guidelines are built around what are known as ‘low and grow’ policies. This means customers may be granted a small initial credit limit and, if the card is used responsibly and other data indicates that the cardholder would be able to manage a higher limit, it may be increased incrementally. This encourages responsible borrowing and allows cardholders to manage their credit.”

It is very unlikely that you will be able increase your credit limit during this initial period unless you have plans to decrease your limit on a different card in order to use another. Plus, even if you do reduce your credit limit on a different card (which, once changed, won’t be able to be changed again for 6 months), it will be up to the card provider’s discretion when it comes to the final decision.

Grant Bather, a spokesperson from Virgin Money said that if customers have “applied for another card with MBNA or Virgin, we can reprioritise their lines between cards”.

“Customers would need to contact us to request this and we’d help them through this process.

He continued: “If the second card they hold is with another lender and they have reduced their credit limit, then we would need some information to consider the customers’ request in order for us to accurately assess their stability, ability and willingness to pay a higher credit line with us.”

Mr Bather went on to say that the circumstances are different for every customer and that each request would be considered on an individual basis.

The information that would be needed would probably be the letter you receive from your other credit card provider saying that your credit limit has been successfully reduced. This, along with the credit check that was conducted by your new card provider when you applied would then be used to see if more credit could be offered to you on your new card.

Increase your credit limit

If you have been offered a low credit limit and would like to increase your credit limit you can inform the credit card company that you would like a higher limit. If you do not have an excellent credit rating, this often results in little action, but it does mean that the company have a record of your request.

If you have checked your payment history and you have evidence that you have paid bills and debts on time, paid more than the minimum payment, and have not maxed out the credit available to you, the company might be more inclined to provide you with an increased limit.

At some point we all wish we had a higher credit limit so we could put down a deposit on a car, or book a holiday, or pay a bill, but it can be difficult to get an increase unless you have a genuine reason. If you want to increase your credit limit for something specific, you should mention this when contacting the company as they may be able to provide you with a temporary credit limit increase.

However, it is not impossible to increase your credit limit. There are ways of doing this over a longer period of time. In order for a creditor to offer you a higher limit, you need to prove to the lender that you are able to manage more borrowed money and debt. This means that paying off your balances in full, always paying on time, not putting in too many requests for an increase, and generally behaving like a responsible borrower all go towards persuading a lender to offer you a higher limit.

Compare credit cards

When you compare credit cards online you should be provided with a guide as to the maximum and minimum credit limits available. It is important that you look at this carefully when applying for credit cards so that you can be sure that the one application you do make is for the card that will best suit your needs and individual circumstances. You shouldn’t make too many applications for credit in a short period of time because it can have a negative impact on your credit score (it makes you look like you are desperate for money; money that you may not be able to pay back).

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The Consumer Credit Directive (CCD) is an initiative that was brought into force in February 2011. The main goal of the CCD was to establish a set of rules for the credit market across the EU. It was designed to protect customers, improve understanding of products and help consumers taking out unsecured credit, such as a loan or credit card.

It is this new Consumer Credit Directive and its European laws that some credit card companies have allegedly been using to take advantage of borrowers. The companies are reportedly promoting catchy credit card deals, for which almost half of consumers would not be eligible for.

There are more and more credit cards which do not charge any interest for a set period available now to customers who are switching from a different provider. However, the number of people that are eligible for these introductory offers has dropped significantly since the introduction of the CCD.

Consumer groups claim that creditors are now using these extra-long 0% introductory rates as a way to entice customers into applying for the credit card products, now that they have to give the deals to fewer applicants.

With the cost of borrowing money at a record low and the law changing, allowing credit companies to decline more applications, there are now a greater number of deals available. The number of credit cards with an interest-free balance transfer period of 12 months has increased by around 200% over the past two years, but post-CCD only around half of the successful applicants are now accepted for the deals.

Previously, before the introduction of the Consumer Credit Directive, credit providers had to offer at least two-thirds (67%) of successful applicants the advertised rates on credit card deals, but this has dropped to just 51% under the new system.

The new laws brought in across the EU were designed to ‘harmonise consumer credit laws’ but the British Bankers Association had warned that more than 1.7 million consumers would be impacted upon negatively, and might even find they are unable to obtain credit.

In contrast, the UK Cards Association said that the directive has not made a significant impact and that the credit card market would continue to be extremely competitive. Despite the fact there is a period of low interest, or a 0% balance transfer offer, with credit card deals, interest rates remain at the highest level for more than 13 years.

If you want to apply for the best credit card deals it is important to think about what you want to use the card for. There isn’t one credit card which will suit everyone, so you will need to research the types of cards that will suit you. As we have said, there are many great credit card deals, including 0% balance transfer deals, you can take advantage of. However, your credit history will be more important than ever.

One of the best ways to find great credit card deals and go on to apply for a credit card is to use online comparison sites, as these are able to provide you with a good idea of rates across the whole market.

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Some of the requirements of the Consumer Credit Directive (CCD) have already come into effect, and others must have been implemented by today, 1 February 2011. Many consumers are unaware of the changes that are coming, even though these changes can help consumers make better credit card choices.

One of the biggest changes is the changeover to what is called positive payment order. Before the CCD, most cards allocated payments to the balances with the lowest interest rate first, causing the balances with higher interest rates to stay unpaid longer, greatly increasing the amount of interest card companies could collect. Now the payment order must be so that consumers clear their most expensive (interest-wise) balances first (Nationwide and Saga have always used the positive payment order system).

Another change brought by the CCD is the introduction of a “representative APR.” This is an interest rate that has to reflect at least 51% of the business the credit card company expects from a particular ad, including all cost of credit information, such as balance transfer fees and annual fees. If more than one interest rate is applicable (such as a different balance transfer and purchase rate), the rate that applies to the most common payoff method has to be shown. With 0% credit cards, annual fees (and any other fees) must be calculated into a representative APR.

Also, if the 0% balance transfer rate lasts for a short time, the duration of that period, as well as the rate it will to when the 0% offer ends, should be shown. This should make it easier to compare credit cards. If you have credit cards, it is important to understand that the changes from the CCD are fundamental changes to how credit card interest rates are calculated and advertised. Ultimately, the changes should help consumers choose more wisely among the various credit products.

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New rules for creditors go into effect in 2011 due to the new Consumer Credit Directive, and they affect your credit cards and loans. Here is an overview of the changes, and what you, as a consumer, should expect.

Creditors must now provide a full explanation of the credit being offered, and consumers will have the right to cancel within 14 days of agreeing to credit terms. Consumers will be informed when their debt has been sold, or when creditors check potential borrowers’ credit worthiness.

Starting in January, credit card issuers have to pay off customers’ highest interest debt first on cards where different types of borrowing carry different interest rates. They must also notify customers twice, on different occasions, of interest rate increases and give customers 60 days to reject the increases and cancel their cards. Customers will have to be given a reasonable amount of time to pay off the debt on the cancelled card.

From 1 February 2011 Credit card issuers must  advertise rates that are representative, meaning rates that more than 51% of applicants are eligible for. They must also account for things like annual fees in calculating their rates, to give consumers a more representative APR when they compare credit cards.

But don’t think that card issuers won’t try to make up potential revenue lost as a result of the Consumer Credit Directive. Many of them are introducing new fees that won’t be affected, such as “dormancy” fees and increased charges for foreign currency exchanges.

For example, Santander will start charging store card customers £10 if they let their cards lie dormant for 6 months. Retailers like Debenhams and Topshop are following suit, making it harder for shoppers who only use cards for introductory offers. To get around this, customers should take advantage of introductory discounts on store cards, pay the bill in full, and then cancel the card.

As for foreign exchanges, card providers have started setting their own exchange rates for credit card customers, making foreign transactions cost more.

The Consumer Credit Directive is designed to protect consumers, but consumers should also be alert to creditors adding new fees in attempts to make up lost revenue.

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The new Consumer Credit Directive takes effect no later than 1 February 2011. Card issuers are encouraged to adhere to the new rules as soon as possible, but all must comply by 1 February. This new directive will affect your credit cards, including cash back credit cards in several ways.

First, the Directive states that lenders have to advertise a ‘representative example’ of the cost of credit. That means when they show you an interest rate, they will have to include fees or charges in their calculations. For example, if a card charges an annual fee that is not reflected in the advertised interest rate, the lender will have to change the advertised rate to include the cost of that annual fee. It may not sound like much, but with some cards it can represent up to a couple of percentage points’ difference in the advertised annual fee, and this will make it easier for you to compare credit cards.

It is unclear how the industry will interpret this directive regarding 0% balance transfer cards. All charge fees for transferring the balance, and when you incorporate the fee, 0% is not accurate. The advertised APR is defined as the one relating to most transactions (available to more than 51% of applicants), so it would not necessarily apply to all cards. This is a change from the current definition of ‘typical APR’ which is defined as the APR that at least two-third of applicants can expect to receive.

One aspect of the Consumer Credit Directive that will affect you, whether you use a cash back credit card, or any credit card, is that you must be notified of changes in interest rates before the changes take place. Currently the credit card issuer must give you 30 days’ notice, but this will increase to 60 days. Also, your credit card provider used to have to tell you at least once about an impending change. With the changes in place, your credit card provider has to notify you of any interest rate increases at least twice. If you don’t agree to the interest rate change, you will have the option of closing the card and must be given a reasonable amount of time to pay off the card debt.

The order in which payments are applied to different interest rate debts on your card will be set so that higher interest rate debts are paid off before lower interest rate debts. There was no rule about this before, and almost all credit card providers directed payments towards the cheapest debts first, prolonging the higher interest rate debts. This will soon be a thing of the past.

The Consumer Credit Directive should be a positive step for consumers who use credit cards, by making credit card lending more transparent and understandable.

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Most people are understandably wary when it’s time to open up the first round of bills after the Christmas holiday season. It’s hard not to get caught up in the excitement of the season, and many of us overspend on our credit cards. So how can we minimise the damage to our personal finances?

There are some very positive steps you can take to cut down on the amount of interest you pay if you have a decent credit history, steps including using 0% credit cards and balance transfer credit cards.

Sometimes 0% credit cards and balance transfer cards are one and the same, but other times a card will offer either 0% purchases for a limited time or 0% balance transfers for a set time, but not both. We’ll assume you’ll use them separately.

If you apply for and receive a 0% purchase card, you’ll pay 0% interest on purchases for a certain time period – usually around six months. If you can find one of these with a cashback feature and you are able to pay off the entire balance before the 0% rate ends, you can actually pocket a bit of money from these cards once the offer is over. At that point, you will need to decide whether to keep the card or cancel it.

With a 0% balance transfer card, you’ll pay a balance transfer fee which will be around 3% of the amount you’re transferring. So if you’re transferring a balance of £600, you’ll pay around £18 to do the transfer. But this is much, much less than you’ll pay in interest if you proceed to pay off the £600 before the 0% balance transfer ends.

With these cards, purchases are charged at a typical interest rate, and used to be paid off after the balance transfer is paid off (only until the end of 31st December 2010 because new rules came into force on 1st January 2011 saying that credit card providers have to put your payments towards the most expensive debt first, in this case purchases, rather than the cheapest debt first), so you used to be highly advised to use such a card only for the balance transfer, and to use another card altogether for purchases.

From 1st January it may still be worth heeding the tips to not use a balance transfer credit card for purchases. This is because the time it takes you to pay off the purchase debt accumulating the higher interest charges will then eat into the time you were initially given to pay off your 0% balance transfer debt – the money you do pay off will pay off your purchase balance before your 0% balance tranfser balance.

Use 0% credit cards and balance transfer cards with discipline, and you can save serious money in 2011.

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The New Year sales will be here before you know it and, if you plan to take advantage of the savings to make big purchases, using your credit card may be the best way to pay, even if you have enough cash on hand to cover the costs. But, make sure you compare credit cards to obtain the best deal.

Paying with a credit card offers you what is known as “Section 75 protection”. This refers to Section 75 of the Consumer Credit Act, which applies to transactions you make in the UK as well as overseas and online. If the seller refuses to give you a refund due to defective goods or fails to send you what you have paid for, or sends you something that is greatly different to what you were expecting, you can have your credit card company dispute the charges with the seller and even get the credit card provider to issue you a refund.

While you can certainly receive refunds when you pay with cash, if there is a dispute over the delivery or quality of goods or services, you don’t have the recourse with cash that you do when you use your credit card.

You can get 0% purchase cards that you can use solely to make your big New Year’s sale purchases. As long as you pay off your balance before the 0% period ends, you won’t pay interest charges. Plus, since you’ve paid with a credit card, you can take advantage of your Section 75 protection, should you be unable to obtain satisfaction with a merchant when pursuing a refund.

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1. Thou shalt promptly dispute erroneous charges on thy credit card bill by “Recorded Signed for” Royal Mail to the bank that issueth thy card, with a description of the billing iniquity, and thou shalt enclose copies of sales receipts or other supporting documents, so that thou may be satisfied.

2. Thou shalt be wary of retail store cards that may tempt thee during the holiday season, for they often carry higher interest rates, retroactive interest charges, and can smite thy credit score if thou already hast too many cards.

3. When thou shoppeth online with thy credit cards, thou shalt first ensure that thy computer is equipped with the latest anti-virus software. Likewise, thou shalt shop on trustworthy sites and beware of the sinful practice of “phishing,” which seeketh to separate thee from thy private bank account details.

4. Thou shalt know thy rights under the portion of the law known as “Section 75 of the Consumer Credit Act,” which applieth to transactions both at home and over the seas and alloweth thou to claim thy money back on goods and services that beareth afflictions that causeth their function to cease.

5. If thou abuseth thy credit card, using it to charge here and charge elsewhere until thy balance approacheth thy card limit, thou shalt cast thy card from thy sight for 30 days and 30 nights, and pay down part of thy debt before accepting thy card back into thy wallet.

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