The credit card sector's best kept secret - Section 75 of the Consumer Credit Act - came into force 40 years ago.
With consumers predicted to spend almost £10 billion on credit cards this December, research shows that 11 million credit card holders are completely unaware that Section 75 protection exists so could really miss out.
But, Black Friday and Cyber Monday shoppers may not be able to rely on Section 75 protection from their credit card provider in the event of things going wrong, with almost a quarter (23%) of claims rejected by providers.
Information on the credit card industry's best kept secret is difficult to come by, with over four out of five card holders claiming they've never received advertising or literature about Section 75 from their provider.
Despite 40 years in existence, only 7% of credit card holders know that Section 75 protection is free protection provided by credit card providers for most items worth between £100 and £30,000.
In the event of needing a refund for problematic items purchased on a credit card, two million would just accept the loss as they 'couldn't be bothered with the admin' and one million would put the item on an auction website
As we head towards the UK's busiest online shopping weekend of the year, new research released today from comparison website money.co.uk reveals that Black Friday and Cyber Monday credit card shoppers could be left out of pocket if things going wrong with an online purchase.
In fact, over the last three years, just over one in five (21%) of the UK's 30 million credit card customers have made a claim under Section 75 of the 1974 Consumer Credit Act, but almost a quarter (23%) of claims were declined by credit card providers.
Section 75 Protection is part of the 1974 Consumer Credit Act which stipulates that credit card providers must take the same level of responsibility as the retailer if something goes wrong with a purchase, an order doesn't arrive or a retailer goes bust.
It will cover consumers for credit card purchases for single items worth between £100 and £30,000 and extends to everything from travel bookings, cars and electrical items to clothing - even if the credit card account has been closed post-purchase, or was only used to pay a deposit.
Consumers that are declined by their credit card provider when they submit a claim can approach the Financial Ombudsman Service (FOS) to investigate the case if a satisfactory resolution cannot be reached.
With credit card holders set to spend almost £10 billion on credit cards in December, knowledge of this free protection could save shoppers millions of pounds in the event of goods or services they purchase not being as described, faulty or failing to arrive, or suffering any other breach of contract.
However, with over four out of five (81%) credit card holders claiming they've never seen any advertising or literature from their provider promoting this free protection it's hardly surprising awareness is so low.
Despite reaching its 40th birthday this year, 11 million credit card holders (37%) do not know that their credit card provider is legally obliged to reimburse them if things go wrong with a £100+ item that they've paid for on the card. In fact, only 7% of credit card holders correctly cited that Section 75 is free protection from credit card providers for purchases between £100 and £30,000.
When it comes to understanding how the protection actually works, 6% believe it only comes with credit cards that levy a fee and a further 6% believe it's an insurance that credit card holders must pay for. Almost one in four (23%) simply don't know what Section 75 protection is.
Section 75 should be top of the list for credit card holders if a supplier or retailer goes out of business; goods or services purchased are not as described; they're faulty or fail to arrive; or in the event of any other breach of contract. In short, Section 75 is an alternative way of securing refunds for goods or services paid for by credit card that individually cost more than £100.
However, two million credit card holders would be happy to sit back and do nothing in this instance, accepting that they'd lost the money as they "can't be bothered with the admin". Almost one million would opt to put the problematic item on an auction website instead.
Hannah Maundrell, Editor in Chief, money.co.uk comments:
"As we head towards the biggest online shopping weekend of the year, many consumers will use their credit card to pay, safe in the knowledge that if anything goes wrong with the booking or purchase they will be covered by Section 75 Protection.
"Whilst this is an amazing free benefit that has been protecting consumers for four decades, 11 million credit card holders are completely unaware that it exists. Despite consumers claiming that one in four of their applications for a refund have been rejected by providers, under no circumstances should people stop making claims.
"However, they should approach their provider 'armed with their rights' and fully understand Section 75 Protection. Even if the card account is no longer open, the claim is still valid in the eyes of the law. For consumers that feel they are being fobbed off by their credit card provider in the event of a rejected claim, the Financial Ombudsman Service (FOS) is at hand to fight their cause."
A consumer only needs to pay a deposit for a big ticket item costing between £100 and £30,000 - such as a car - on a credit card and the provider would be liable for the entire value of the purchase if something goes wrong.
The protection is only valid for single items costing £100 or more, it's not based on the total spend. This means it falls down if cheaper items are listed as separate purchases. For example, return flights booked as separate outward and inward journeys at £80 and £30 would not be covered under Section 75 as neither journey cost more than £100.
Contrary to popular belief, there is no first port of call so consumers do not have to go the retailer first.
If a secondary cardholder pays for a purchase on their card, the item will not be covered by Section 75 protection.
Equally, if you make the purchase through an intermediary, such as group buying website, you will not be covered. Booking through a travel agent rather than with a flight or hotel direct your purchases may not qualify for Section 75 protection.
Items worth less than £100 or made on a debit card aren't covered by Section 75 protection, but they should qualify for the Chargeback scheme; this is voluntary protection available from banks and credit card companies. It doesn't guarantee you a refund if something goes wrong, but it's worth investigating if you can't claim under Section 75.
If you pay for purchases using Paypal or via Amazon marketplace your purchase will not be covered by Section 75 protection. These organisations have their own legal protection in place but it's not to the same standard.
Items paid for using 'in store instalment credit' are covered by Section 75 but those purchased via hire purchase agreements are not. It's important to understand which of these you are signing up to when you make a purchase.
Vouchers are covered by Section 75 if you buy them directly from a retailer. In the event of a store going bust before you get to spend the vouchers, you would be entitled to make a claim. However, vouchers bought via a third party are not covered by Section 75.
As well as covering you for the cost of the item you can claim for 'consequential loss'. This means that, if you were forced to splash additional cash as a result of the problem you can claim this back as well.