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Credit

Introduction

Nowadays, many people use credit to help them with their buying. It helps to spread the load, especially with expensive items such as furniture or cars. But borrowing can be costly and with so many different types of credit available, it is wise to shop around before you sign any credit agreement.

Using a credit card when buying goods costing over £100 but under £30,000 can provide extra protection if you have a problem with your purchase. Whether you use your credit card to pay the full amount or even part of the deposit (as little as £1 but no more than £25,000), the credit card company is legally bound to help in cases of faulty goods or non-delivery if the retailer goes out of business.

Try to avoid interest charges by paying your credit card bill off in full when it arrives.

Be warned, however, that you may not be protected if your payment is made through a third party - see the section below on credit cards.

What the law says

The main law to give you protection when buying on credit is the Consumer Credit Act 1974, as amended by the Consumer Credit Act 2006. By law you're entitled to a copy of your credit agreement so make sure you get one. Never sign a blank form or even leave some sections blank.

Useful information

CANCELLATION RIGHTS

You can cancel some agreements and not others so it is vital to check the credit form. If you can cancel there should be a box headed 'Your Rights to Cancel' which tells you what to do. You can't cancel if you sign in the trader's shop, office or other business premises such as an exhibition stand. But you can cancel if you met the trader to discuss the deal and you signed the form at home. There is a very limited time period in which you have the right to cancel.

CREDIT REFERENCE AGENCIES

You don't have a right to credit. Before giving you credit, lenders want to check whether you're an acceptable risk. To help them do this they may check with firms called Credit Reference Agencies. These agencies don't keep 'black lists' or give an opinion as to whether or not you should be given credit. They just provide information about your credit record. You are entitled to see a copy of any information they hold on you.

CREDIT CARDS

Under section 75 of the Consumer Credit Act 1974, if you use your credit card to buy something costing more than £100 but no more than £30,000, you can claim from the credit card company or the trader if something goes wrong.

However, you may not be covered if you use your credit card to make payments to a company that isn't the one providing you with the goods or services, as shown in the following examples:

Many websites use an online payment processor such as Paypal, Worldpay or Google Checkout. While the law in this area is not certain, you may not be covered by the protection offered by section 75. Online payment processors do have their own refund systems, so make sure you read their terms and conditions carefully.

If you use a credit card to buy airline or other travel tickets from a travel agent you cannot normally claim against the travel agent if the airline delays or cancels the flight as they were contracted to supply the ticket, not the flight.

However, if you use a credit card to buy the travel agent's own package of travel arrangements the agent then becomes the supplier of the holiday package and has equal liability with the credit card company.

HIRE PURCHASE

You cannot end a hire purchase agreement unless you're up to date with your payments. You will have to pay at least half of the total hire purchase price. You cannot sell the goods until the agreement has been paid off.

CREDIT SALES

The goods become yours from the start and cannot be repossessed. But you can be sued for the money you owe if you get into arrears with your payments.

PERSONAL LOANS

Shop around for the best value. Always consider how long it will take you to pay back the loan and how much you will pay in total, as well as how much your monthly payments are. Always check the Annual Percentage Rate (APR) being charged. It is the best way of comparing one deal with another. Generally, the lower the APR, the better the deal.

MONEY LENDERS

They charge high interest rates and you should be very careful with this type of credit. Avoid anyone who simply calls at your home or speaks to you in the pub and offers you a loan: they are committing a criminal offence. Moneyleaders may ask for some security for the loan. If they do, never give them your child benefit book or other social security book.

CREDIT UNIONS

To borrow from a credit union you must first become a member and show by saving regularly over a set period that you will be able to afford the repayments. This is an excellent way of getting credit as the interest rate is usually lower than that used by other lenders.

What to do if you have a complaint

Even if you think the goods are faulty, don't stop your payments or you could end up in trouble. See the shop manager at once and let your finance company know about the problem. If you can't sort it out yourself you should ask for advice from Consumerline on 0300 123 6262, your local Advice Centre or Citizens Advice.

If at any stage you feel that the lender is generally trading unfairly, you should tell Consumerline. The matter can be referred to the Office of Fair Trading which issues credit licenses to all authorised lenders.

click here to download advice leaflet on credit.

From category: Money Matters