If you're sold a dud then plastic will protect you

With many of us still groaning under the burden of post- Christmas debt, many financial advisers suggest we cut up our credit cards to stop us spending any more.

But plastic isn't all bad; it does have one big advantage. Whenever you use a credit card to pay for goods or services that cost more than £100 and less than £30,000, the card issuer is jointly liable with the seller if something goes wrong, according to Section 75 of the Consumer Credit Act (CCA). It's an enormously useful law and can make the difference between getting your money back and losing everything if the company you are dealing with goes bust.

One Independent on Sunday reader had just this experience when, as a student, she bought a computer from an independent retailer. "It failed to be delivered on three or four occasions and when it did arrive it didn't work," she says. "The shop sent someone to sort it out, but he wasn't able to and I'd had enough by this time, as I was doing an MA and needed a computer. The owner of the shop refused to take it back saying she would send someone else to look at it.

"The Citizens Advice Bureau told me I was within my rights to take it back as it was not fit for the purpose for which it was sold," she adds. "The owner refused to refund the money so I got in contact with MBNA, my card issuer.

"MBNA took on my case and it went to arbitration, taking six months to get sorted, although that was the fault of the shop. The owner kept refusing to give in. I'm not sure how MBNA finally got the money back but, as far as I was concerned, it was fantastic. To my relief, I didn't have to pay anything."

The only problem with Section 75 is that many cardholders are unaware it exists and so fail to claim their money back. The agreement covers everyone with a credit card and so, not surprisingly, the card companies do not fall over themselves to let consumers know about it. In fact, a recent survey by Which? magazine found that the only place you will find any mention of it is in the small print of card issuers' terms and conditions.

Not only are many consumers unaware of this right but others are fobbed off by card firms unwilling to part with their cash. "In some cases they've been downright obstructive," says Mike Naylor of Which?. "When people have asked to be reimbursed under Section 75, companies have just refused at first. It can take months and a lot of letters to get the money out of them."

Another point not widely known is that Section 75 covers you for purchases over £100 even if you have not put the total amount on your card. There is a grey area with foreign purchases, though, and those made by an additional cardholder. The Department of Trade and Indus- try is currently reviewing the CCA over these two issues. "There was a voluntary agreement by credit firms until a few years ago that they would cover foreign purchases," says Mr Naylor. "And since that ran out, some are still honouring it but others aren't."

In 2000, MBNA won a court case that found Section 75 doesn't apply to some purchases made by additional cardholders. However, the Office of Fair Trading and the Consumers' Association disagree and are waiting for the outcome of the review. In the meantime, it is worth applying to be reimbursed in these cases as your card company may be one that is still honouring the agreement.