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Credit card cheques

Beware! These benign looking cheques, sent out by your credit card company, look totally harmless. They are not! When you use your credit card normally, you get rights under Section 75 of the Consumer Credit Act 1974. For details on that see my page on Equal Liability. This is because the Act regards any transaction as part of a debtor-creditor-supplier agreement - you cannot use your card unless the retailer agrees to accept the card. there is therefore a relationship between retailer and card company.

The same cannot be said when you use a credit card cheque. Although any such cheque will be debited against your card account, there is no link between the payee of the cheque and the card company. This means that the transaction counts as part of a debtor-creditor agreement, and equal liability will not apply. Not that the credit card companies will necessarily tell you that....

A recent one from MBNA:

If you use credit card cheques to make card purchases you will not have the same degree of protection under the Consumer Credit Act 1974 as when using your credit card.

but a good one from the Co-operative Bank, provided you know what Section 75 means!

Any use of the Credit Card Cheques by you is not covered by the Provisions of Section 75 of the Consumer Credit Act 1974.

A recent reconsideration by APACS, the Association of Clearing Banks, led to the plan to restrict credit card cheques, by ensuring they should not be sent to vulnerable consumers. All their members have agreed to implement summary boxes explaining their working by 31 December 2006.

The DTi has recently reviewed the use of credit card cheques. For details see www.dti.gov.uk/ccp/consultations.htm. They have not proposed any changes, subject to creditors agree to make consumers' rights and limitations on those clearer on such offers.