Credit Cards – Little Known Facts

We’ve assembled some important facts here that many people aren’t aware of. This information helps you to get the best out of your credit cards, and stay financially in control.

I’ve heard credit card companies now use Risk Based Pricing, what is that?

Its now common for credit card and loan issuers to assess you as a financial risk, and then make a conditional offer of credit to you that’s priced according to their assessment of you as a risk. This means if they assess you as a good credit risk, you’ll be offered favourable pricing probably in terms of a more competitive interest rate, because they want your business. If you look like a poor risk to them, they may still offer you credit but at a higher interest rate than the best rate published in advertising. Take a look at and follow our Top Tips to improve your credit rating if you want to be get offered the best deal!

This seems like a fair system, but as the lenders and card issuers don’t publish their criteria, it’s difficult for us to compare their methods and report this to you.

What is ‘Section 75’ protection on credit cards?

Section 75 of the Consumer Credit Act 1974 makes your card issuer jointly liable with the company you’re buying goods or services from if something goes wrong with the transaction. It currently applies when you use your credit card to pay for something costing between £100 and £30,000. Section 75 applies even if you use your credit card to buy items abroad or if you shop online using your credit card.

This can be useful if you have a issue with something you bought and you can’t get the seller or retailer to resolve it, or if you paid in advance for a product or service you didn’t ultimately get – if the company’s gone bust or disappeared for instance.

You can claim the value of a purchase from your credit card issuer, not just the amount you paid on your credit card i.e. if you paid part of the costs or a deposit.

In the past credit card companies have challenged whether Section 75 applies to purchases made overseas. In order to clear up the confusion The Office of Fair Trading (OFT) went to the High Court to resolve the matter.

It lost the case, but won, on appeal, in 2006. This means that foreign transactions on your credit card are covered in the same way as UK ones.

Do I need credit card protection insurance?

Credit card protection insurance claims to provide cover against fraudulent or wrongful use of your cards if they are lost or stolen. It sounds great but it’s of little use because, under the Consumer Credit Act 1974, the most you’ll ever be liable for on your credit card is the first £50!

You’re not liable for any misuse at all once you’ve reported the credit card lost, compromised or stolen.

In most situations you’re not even liable for the first £50 (and most credit card issuers waive the charge anyway).

Why are UK retailers allowed to charge different amounts for different methods of payment?

The right of retailers to price goods and services differently depending on the method of payment is a mainly British thing.  The fees the Merchant Services Providers charge the retailers for processing transactions varies greatly, but can be as much as 4.5% of the value of the goods which obviously eats into their margin.

In the United Kingdom, merchants won the right through The Credit Cards (Price Discrimination) Order 1990 to charge customers different prices according to the payment method used.

The practice is banned under state law in many places in the USA.

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