If you’ve ever been tempted by a “buy now, pay later” offer or a too-good-to-be-true discount online, you need to stop and read this. Martin Lewis, the nation’s money-saving champion, has issued a stark warning about using your debit card for certain online purchases.
But this isn’t just a personal finance tip. It’s a story that goes right to the heart of UK government policy, the gaps in our financial regulation, and the critical difference between legal protection and corporate goodwill.
The Warning: Debit Cards Lack Section 75 Protection
The core of Martin Lewis’s message is simple: Your debit card does not have the same legal protection as your credit card for purchases between £100 and £30,000.
This protection is called Section 75 of the Consumer Credit Act 1974. It makes your credit card provider jointly and severally liable if something goes wrong with a purchase. In plain English, this means:
- If the company you bought from goes bust.
- If the item never arrives and the seller disappears.
- If the product is faulty and the retailer refuses a refund.
…you can claim your money back directly from your credit card company. They are legally obligated to help.
Debit cards and services like PayPal do not have this legal protection. You are reliant on the much weaker chargeback scheme, which is a voluntary agreement between banks, not a legal right. While chargeback can be effective, it has time limits, and banks can refuse your claim. There is no guarantee.
ICYMI: The breakdown of the difference between Section 75 and Chargeback in more detail in legislation.gov.uk.
| Payment Method | Key Protection | Legal Basis | Protection Amount | Key Strengths | Key Weaknesses |
|---|---|---|---|---|---|
| Credit Card | Section 75 | Consumer Credit Act 1974 (Law) | £100 – £30,000 | Legally binding. Joint liability with retailer. Strongest protection. Covers breaches of contract. | Only applies to single items costing £100+. Does not cover purchases under £100. |
| Debit Card | Chargeback | Scheme Rules (Voluntary) | Varies; typically no upper limit | Can be used for amounts under £100. Wider range of claim reasons (e.g., fraud). | Not a legal right. Banks can refuse claims. Strict time limits (often 120 days). More complex process. |
| Buy Now, Pay Later (BNPL) | Varies by Provider | Mostly Unregulated | Varies | Convenient, often interest-free. | Largely unregulated. May not protect you if the retailer fails. You could still owe the BNPL firm for an undelivered item. |
The Government Policy Link: A 50-Year-Old Law in a 21st-Century World
So, why does this matter for government policy? Because the Consumer Credit Act 1974 is showing its age.
- The Digital Gap: The Act was designed for a different era. It doesn’t adequately cover modern payment methods like cryptocurrency, some digital wallets, or even certain BNPL (Buy Now, Pay Later) schemes. The government has been grappling with how to regulate these new sectors to provide similar protections. You can read the government’s latest consultation on the future of payments on the Gov.uk.
- The £100 Threshold: The lower limit of £100 is a major pitfall. In today’s economy, many essential purchases—a train ticket, a hotel room, a weekend break—can fall just under this threshold, leaving consumers exposed when using a debit card.
- The BNPL Conundrum: The government has been promising to regulate the BNPL industry for years. These schemes often market themselves as an alternative to credit cards, but they currently operate without the same robust consumer protections. Martin Lewis’s warning implicitly highlights this regulatory gap. If you use BNPL (which acts like a short-term loan) and the retailer fails, you could still be on the hook for payments for an item you never received. For the latest status on BNPL regulation, see the FCA’s official statement on BNPL.
What is the government doing? The Consumer Duty and Future Reforms
The good news is that change is (slowly) happening. The UK’s financial watchdog, the FCA (Financial Conduct Authority), has introduced a new Consumer Duty. This requires financial firms to act to deliver good outcomes for customers and to avoid causing them foreseeable harm.
While not a direct replacement for Section 75, the Consumer Duty puts a greater onus on banks to treat customers fairly in disputes, which could strengthen the application of the voluntary Chargeback scheme.
Furthermore, the government has committed to a once-in-a-generation overhaul of the Consumer Credit Act, aiming to bring it into the digital age. The goal is to make the rules clearer and more adaptable to new payment technologies, potentially extending stronger protections to a wider range of transactions.
The Bottom Line: Your Action Plan
While we wait for policymakers to catch up, you need to protect yourself. Martin Lewis’s advice is your best defense:
- The Golden Rule: For any single purchase between £100 and £30,000, use a credit card—even if you pay it off in full immediately. This triggers the powerful Section 75 protection at no cost to you (provided you clear the balance).
- For smaller purchases:Â If you must use a debit card, ensure you understand your bank’s chargeback process. Keep all receipts and correspondence.
- Be BNPL-aware:Â Understand that using Buy Now, Pay Later does not offer the same safety net as a credit card. Use it with caution.
Martin Lewis’s debit card warning is more than just savvy financial advice; it’s a public litmus test for the effectiveness of UK consumer protection policy. By understanding the rules and the gaps, we can not only safeguard our own money but also add our voices to the call for a financial regulatory system that is fit for the modern world.
Making informed financial decisions starts with understanding exactly what’s in your pocket. While using a credit card for protection is smart, managing your overall cash flow is just as crucial. Before making any significant purchase, get a clear picture of your disposable income by using our Tax to Salary Calculator. It helps you see your exact take-home pay after tax, National Insurance, and pension contributions, ensuring you can confidently budget for both essentials and protected larger purchases.
Disclaimer:Â This blog post is for informational purposes only and does not constitute financial advice. Please seek advice from a qualified professional for your personal circumstances. For more expert insights, always refer to MoneySavingExpert.com.