Travel Agent Went Bust? Why Paying with a Credit Card Saves You
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| Travel Agent Went Bust? |
You book a dream holiday to Spain for £2,000. Two weeks later, you turn on the news and see that the travel agency has collapsed. They have gone into administration.
If you paid by Debit Card, you are reliant on a voluntary bank scheme called "Chargeback," which is not guaranteed by law.
But if you paid by Credit Card, you can simply call your bank and say: "I am making a claim under Section 75." The bank is legally obliged to refund you the full £2,000, even if the travel agent has vanished.
What is Section 75?
Section 75 of the Consumer Credit Act 1974 is a UK law that gives credit card users a superpower. It states that the credit card provider is "jointly and severally liable" for any breach of contract or misrepresentation by the retailer.
In simple English: If the shop breaks its promise (e.g., goes bust, sends faulty goods, or doesn't deliver), the bank is just as responsible as the shop. You can sue the bank to get your money back.
The Golden Rules for Claiming
This protection is automatic, but you must meet specific criteria:
- Price Range: The single item must cost between £100 and £30,000. (Trap: If you buy two flight tickets for £60 each, the total is £120, but the single item is only £60. This is NOT covered).
- Credit Card Only: Debit cards, charge cards (like Amex Gold/Platinum charge cards), and cash do NOT have this legal protection.
- Partial Payment Counts: You don't have to pay the full amount by card. If you pay a £1 deposit on your credit card and the rest in cash for a £5,000 car, the entire £5,000 is covered by Section 75.
The "Broken Link" Trap (PayPal, BNPL & Amazon)
This is where thousands of people get caught out. Section 75 only applies if there is a direct link between you (the debtor), the card issuer, and the supplier. If you use a middleman, the link is broken.
⚠️ When Section 75 Fails
- PayPal / Google Pay: If you load money into a wallet and then pay, you break the direct link. (Note: Using a card via a payment gateway is usually fine, but loading a wallet is risky).
- Buy Now Pay Later (BNPL): Using services like Klarna, Clearpay, or Monzo Flex often involves unregulated credit agreements that are NOT covered by Section 75.
- Third-Party Agents: If you buy a flight via a "booking site" (Aggregator) rather than the airline directly, the bank may argue the contract is with the agent, not the provider.
Section 75 vs. Chargeback
Don't confuse Section 75 with "Chargeback."
| Feature | Section 75 | Chargeback |
|---|---|---|
| Legal Status | The Law (Bank MUST pay) | Bank Rule (Discretionary) |
| Cards Covered | Credit Cards Only | Debit, Credit, & Prepaid |
| Protection Strength | Powerful (Covers consequential loss) | Weaker (Refund only) |
| Time Limit | 6 years (Limitation Act) | Usually 120 days |
Conclusion
For any purchase over £100, always use a credit card.
Even if you have the cash in your bank, pay on credit to get the Section 75 protection, then pay off the bill immediately to avoid interest. It is free insurance provided by the UK Government. Don't waste it.
Disclaimer: This article is for informational purposes only. Section 75 protection applies to specific credit agreements in the UK. Rules regarding third-party payment processors (like PayPal) are complex and subject to change. Always check the terms of your payment provider.
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