Hang on … do you actually have Section 75 chargeback rights as a supplementary credit card holder?

If you read the Head for Points comments section, you will know that ‘Section 75’ coverage often comes up when discussing payment aggregators such as Curve.

‘Section 75’ is the UK law which makes a credit card company jointly liable with the retailer for anything you buy, as long as you spend over £100 and under £30,000.  (You can charge as little as £1 to a credit card to get the coverage, but the total purchase must be over £100.)  You can claim up to six years after the original purchase.

If the retailer goes bust or the product is faulty and the retailer shuns your refund request, you can go to your credit card company and ask for a refund.  It is one of the most consumer friendly pieces of legislation around.  I’m never sure if the credit card companies are pleased it exists, but it is a great advertisement for using a credit card instead of cash or a debit card for major purchases.

Of course, you can easily not be covered by this rule, but it doesn’t matter much:

American Express charge cards are not covered – neither would the Lufthansa Miles & More Diners Club / pre-paid Mastercard cards – because they are not credit cards.  Both run their own voluntary schemes, however, which give equivalent cover.  Technically these voluntarily schemes are not as good, because they do not have the law behind them, but in reality you will be fine.

Any purchases you make via Curve Card, PayPal or similar products are not covered.  This is because the contract chain goes ‘you / Curve or PayPal / underlying credit card / retailer’ so there is no direct contract for that particular purchase between you and the credit card company.  Again, Curve and PayPal have their own voluntarily schemes so you shouldn’t lose out.

But if you pay directly with a credit card you’re fine ….. aren’t you?

A report in the Financial Times this week (article is here behind a paywall) suggests not.  There is an interesting catch to the Section 75 rules.

Purchases made on supplementary credit cards are not covered by Section 75 if the main cardholder is not a beneficiary.

If your partner has a supplementary credit card on your account, and they make a purchase with it for themselves, you do NOT automatically get refunded if the retailer goes out of business.  This is because the credit card contract is only with the main cardholder.

On the other hand, if your partner used a supplementary card to book a holiday for both of you then you ARE covered, because the main cardholder is a beneficiary.  Similarly, if your partner bought a present for someone which was to be a gift from both you, it should be covered.

Similarly …. purchases made for a third party by the main cardholder are not covered under Section 75.

Most of the time this wouldn’t matter.  If you buy a sofa for your Mum and it is never delivered to her due to bankruptcy, the credit card company is unlikely to find out that it wasn’t for you.  However, if you book a flight or hotel for someone else then the paperwork will clearly show that you are not the traveller and coverage could be refused.

I know that many HFP readers offer to put purchases for friends and family through their cards.  This could be to help them hit spending targets for a bonus or to benefit from, say, double points on airline purchases on Amex Gold.  This may not always be sensible.

This is what Which? has to say on the matter:

Additional cardholders

If somebody else such as your partner has a credit card and has added you as an additional cardholder, it’s usually best to get the main cardholder to make any big purchases, rather than using the extra card yourself.

This doesn’t mean that purchases made by a secondary card holder will never be covered, but it’s best for the primary card holder to make larger purchases if you want to be sure of protection under Section 75.

If, however, the purchase is made with the primary card holder’s authority and if they expressly request the purchase and will benefit from it – a family holiday, for instance – they will still be covered under Section 75. 

Technically, you are probably better off with an American Express charge card supplementary card than a credit card supplementary card.  All Amex claims, whether from the primary or secondary cardholder, are dealt with under their voluntary code so there should be no difference in whether or not you get repaid.  A credit card company could choose to act under the letter of the law and not cover supplementary cards.

For clarity …. I wouldn’t get too paranoid about this.  Realistically, however you pay, you are likely to be reimbursed under a voluntarily scheme even if Section 75 fails.

However, if you are one of those people who won’t use Curve or PayPal because they want 100% legal certainty of being paid back, you should also ensure that you aren’t charging big purchases to a supplementary card.

Thanks to Andrew for his help with this.

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