Guests that paid with a debit card have been told their best hope is to add their name to the company's long list of creditors with the Trading Standards Institute advising them to write to administrators KPMG as quickly as possible.
However, those that paid for gifts costing more than £100 with a credit card should have little problem reclaiming their cash thanks to section 75 of the Consumer Credit Act. With more companies going under in the tough trading environment, this could provide vital peace of mind that your big-money purchases are always secure.
What is section 75 and why is it important?
Under section 75 of the Consumer Credit Act of 1974, customers with a claim against a supplier for breach of contract or misrepresentation will usually also have an equal claim against the card issuer. This means that claims can be made against the credit card company when the supplier goes out of business.
It's not necessary to get a county court judgment - instead customers can simply choose whether to claim against the supplier, the card issuer, or both (although money cannot be claimed twice). Section 75 applies to the majority of credit card purchases, but the cash price of the goods or services must be more than £100 and not more than £30,000. It also applies to the total value of the goods purchased, not just the amount paid for on credit. Say you paid for the deposit on a car with your credit card and paid the balance by banker's draft, but the car dealer went bust before you took delivery of the vehicle, you could claim the whole amount back from your card provider (assuming it wasn't more than £30,000 in total).
And it's not just companies collapsing that section 75 gives protection against: you can also claim against your card provider if the goods you purchase are faulty or damaged but the retailer is refusing to give you a refund.
This protection simply does not apply to purchases made with debit cards, charge cards, cash or cheques. Given the fact that paying for goods with plastic is now a major part of daily life, particularly thanks to the emergence of internet shopping, using a credit card instead of a debit or charge card can be a much safer option just in case the worst happens.
The other thing to bear in mind when paying with a credit, or debit card, is security, particularly if you are making a purchase over the phone or internet. For more information on how to protect yourself against fraud, click here to watch our video.
So which credit cards are best for purchases?
If you've got a large purchase looming that you won't be able to pay for all in one go, shop around for a 0% purchase card - that way you have an introductory period during which you can pay off your balance.
The market-leader is the Capital One Platinum, which offers 0% on purchases until November 1, 2009 - giving you approximately 15 months to pay off any immediate purchases. The deal also offers the same 0% period on balance transfers meaning that if you have an existing debt on another card you could move the debt over to the Capital One Platinum and not pay any interest. There is however, a 3% balance transfer fee.
Another option is the Halifax One Online Special, which also has a combined 0% purchase and balance transfer offer for 10 months with a typical rate of 15.9%.
Remember that the leading rates and 0% offers are only available to those with good credit scores. If your credit score isn't up to scratch, use our Smart Search tool to find deals you're likely to qualify for based on an assessment of your credit profile.
What if you pay off the balance in full?
If you're likely to pay off the balance in full each month then go for a card that rewards you for spending.
The American Express Platinum is the market-leading cashback card offering 5% cashback on any spending in the first three months (up to a maximum of £4,000). Once the introductory period has ended, you earn 0.5% on the next £3,500 you spend, 1% on spending between £3,501 and £10,000 and 1.5% on any spending above £10,001.
The Barclaycard Cashback is also competitive, offering 4% cashback until September 30, 2008, and then 0.5% until January 1, 2010.
For a card with membership benefits, the American Express Blue Sky Card is appealing with one point for almost every £1 spent with points redeemable against travel expenditure you make with the card such as flights, hotels, car rentals, train fares, cruises and package holidays.
It's only worth opting for a rewards card if you clear your balance in full: if you don't, the interest you are charged will far outweigh the value of any cashback or rewards you earn. The American Express Platinum card for example, has a standard rate of interest of 18.9%
If you'd like to see more of the cashback and rewards cards on the market, visit our credit cards section.
Have your say: Have you managed to get your money back on something because you paid using a credit card, or perhaps you lost out because you used an alternative method of payment? You may even be trying to get a refund for something at the moment and are struggling, in which case visit our forum as other members may be able to help.
Disclaimer: Please note that any rates or deals mentioned in this article were available at the time of writing.
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