You are protected by Section 75 of the Consumer Credit Act whenever you make a purchase for goods or services worth between £100 and £30,000 using your credit card.
Section 75 states that you and your credit card provider are 'jointly and severally liable' for your purchase, meaning if something should go wrong, your credit card provider must refund you if the retailer will not.
In terms of 'things going wrong' this includes cases when the goods you have paid for are not delivered, are faulty or damaged, or if a company goes into administration before you get your goods. In all such cases your credit card provider is legally required to refund your money.
The way that your credit card purchases are protected is very black and white, but when it comes to debit cards, it is more of a grey area.
How are debit card purchases protected?
While credit card purchases are protected under Section 75 of the Consumer Credit Act, debit card purchases are not covered by this protection because they are not part of a credit agreement.
However, most debit card providers are starting to offer a form of protection when you make purchases using your card.
You have some protection for purchases made using all UK debit cards, including: Visa, Visa Electron, MasterCard and Maestro debit cards, through something called Chargeback. (There is a similar purchase protection scheme in place for Amex charge cards.)
The Chargeback scheme allows you to put in a claim for a refund for any goods that have not arrived, or have arrived damaged, goods that are different to how they were described, or if the merchant has stopped trading.
You can claim a refund for any amount of money when using the chargeback system. This means that even if you bought something on your credit card that is not covered by Section 75 as it cost either over £30,000 or under £100 in value, you could claim instead using chargeback. Although these items could not be claimed under Section 75 you could try to claim for them under the chargeback system.
Remember that any protection offered is not a legal obligation (like Section 75 for credit cards) but an in-house rule: this means that the exact rules for chargeback schemes vary by card provider, so you should make sure you are aware of your debit card's chargeback rules.
If you want to make a claim, you will normally have to contact the bank who provided you with the card within 120 days of when you are aware that there is an issue with the goods, or the day that they are delivered. If the goods are faulty or your card was used fraudulently, contact your bank within 120 days of when you are first made aware of this.
Ask them to initiate the Chargeback process and a dispute will be opened by your bank, who will investigate the matter and refund your money when this is settled.
If your Chargeback claim fails, you can take it to the Financial Ombudsman Service within six months of being notified.
PayPal's purchase protection scheme
Unfortunately, you are unlikely to be protected under debit card Chargeback schemes for items purchased using PayPal. In these cases the act of loading money onto your PayPal account counts as the debit card transaction, so unless the money fails to be credited it will not be covered.
PayPal runs its own purchase protection scheme which extends some cover to your purchases, but again it is in-house rather than regulated by law. You can read about the scheme on the PayPal website.
It is worth noting however that while credit card providers are under a legal obligation to refund you because of the Consumer Credit Act, debit card providers are not legally required to honour your refund request. Therefore, a little more persistence may be needed when claiming a refund for your debit card transaction.
In all cases of purchases made using a credit or debit card which are unsatisfactory, it is always a good idea to take up the matter with the retailer or service provider first before claiming for a refund from your card provider - they may be able to settle the dispute themselves, saving you potential hassle.