Credit Cards

Credit cards are issued by banks, building societies and other organisations, usually under the MasterCard or Visa schemes. They can be used to pay for goods and services, or to obtain cash. A credit card function may be included in your multi-purpose card which combines a cash machine card and cheque guarantee card. Some credit card issuers provide purchase protection insurance to cover, for a period of time, purchases made with their credit cards. The insurance often has a significant number of exclusions and should not be considered as an alternative to normal household or travel cover.

A credit card company may provide credit card cheques. These cheques are used in the same way as other cheques but any money spent is debited from the credit card account. The use of credit card cheques attracts immediate interest (if tyou use a credit card itself, there is usually an interest-free period). There is also a handling fee.

Does the Consumer Credit Act apply to Credit Cards? (is it a regulated agreement)

Credit cards are credit agreements regulated by the Consumer Credit Act 1974, subject to the usual conditions. The Consumer Credit Act 1974 will usually apply both to transactions made by credit card and you agreement with the credit card company. In some cases, a credit card agreement technically involves two separate agreements. In one agreement, you are entitled to use the credit card to obtain goods or services, and in the other you use it to obtain cash advances. Each separate part of the agreement must be looked at individually to see if the Consumer Credit Act 1974 applies. If you are authorised to exceed the credit limit on the credit card, the excess does not become a separate agreement.

Multi-purpose cards If a client has used a multi-purpose card, you will need to check whether it was the credit card function that was used. The cheque guarantee or cash machine functions do not usually count as credit tokens and these functions are not credit agreements regulated by the Consumer Credit Act.

Sometimes a cheque guarantee card or cash machine card allows the client to obtain credit (overdraw on the account). If this is the case, the card is considered to be a credit token (whether the credit facility is actually used or not), and the Consumer Credit Act applies. However, the credit provider is not equally liable if there is a problem with goods or services bought using cash obtained with the card. This is because there are no pre-existing arrangements between the trader and the credit provider.

Contractual terms for Credit Cards

When you make an agreement to have a credit card, you make a contract with the credit card company. This contract regulates your relationship with the credit card company and sets out the terms and conditions which apply. These must be sent, in writing, to the you when the card is issued or renewed or when any changes are made to the terms and conditions. The terms and conditions will include:-

• the minimum amount which must be repaid each month
• how interest is calculated
• who can use the card. (In some cases, the card holder agrees that an additional card holder can use the card, but remember that the client is liable to the credit card company for the whole of the credit used on the card, whether incurred by her/him or by the second card holder)
• your responsibility to look after the card and prevent unauthorised use
• details of your liability and the credit card company's liability if the card is lost or stolen
• how to cancel the card
• what information you must tell the credit card company, for example, change of address
• the right of the credit card company to alter the terms and conditions with written notice.

In addition, you will be sent a written notice when the card is issued setting out your personal credit limit, the current rate of interest, and any other charges or conditions which apply. If changes are made to any of the terms, you will be told of these in a separate letter or on your monthly statement.

What if goods or services bought with a credit card are unsatisfactory?

If the goods or services purchased with a credit card are unsatisfactory, or there is another breach of the contract for goods or services, you have contractual and statutory rights to take action against the trader, using the Sale of Goods Act 1979 (as amended) or the Supply of Goods and Services Act 1982 (as amended). The contract between the trader and you is made when the trader accepts the credit card, even though the trader may not receive actual payment from the credit card company until a later date.

The credit card company is equally liable for unsatisfactory goods or services or for any misrepresentation.