Choosing between chargeback and small claim

These four routes are not really alternatives you pick between at random. They fit together in a sequence, and which one is right depends on how you paid, how much is involved, whether the trader still exists, and what has already happened. Here is how to think about it.

Chargeback

Chargeback is not a legal right. It is a rule of the card schemes (Visa, Mastercard, American Express) that lets your card provider try to reverse a transaction by clawing the money back from the trader’s bank. It applies to debit cards, credit cards and prepaid cards, and there is no minimum amount, so it is often the only card-based route for purchases under £100 or for anything paid by debit card.

It is usually the quickest and simplest option. Typical situations where it fits well are goods or services not received, goods that were faulty or not as described, a trader that has gone out of business, or a payment taken twice or in the wrong amount.

The important limits are the time bar and the fragility of the outcome. Chargeback claims are subject to scheme time limits, commonly around 120 days from the transaction or from when you became aware of the problem, so you should act quickly. The trader’s bank can dispute the chargeback, and if the appeal fails there may be nothing further the card scheme process can do. Chargeback also does not create a legal debt the trader owes you; it simply reverses the payment if the claim succeeds.

Section 75

Section 75 of the Consumer Credit Act 1974 is a genuine legal right and is generally stronger than chargeback where it applies. It makes your credit card provider jointly and severally liable with the trader for breach of contract or misrepresentation. That means you can claim against the card provider as if you were claiming against the trader.

The key conditions are that you paid at least part of the price on a credit card (not a debit card), and the cash price of the single item or service is more than £100 and no more than £30,000. You only need to have paid a part of the price on the card for the whole item to be covered, so even a small deposit on the card can bring an expensive purchase within Section 75. It does not normally apply to purchases made through some third-party payment intermediaries where the necessary direct debtor-creditor-supplier link is broken.

Because it is a legal liability, Section 75 can cover not just the price paid but also consequential losses flowing from the breach or misrepresentation, which chargeback cannot. It is the route to prefer for credit card purchases over £100, especially where the trader has become insolvent, refuses to help, or the loss is larger than the amount paid.

Financial Ombudsman Service

The Ombudsman is not a first port of call. It is what you use if the card provider mishandles a chargeback or refuses a valid Section 75 claim. You must first complain to the card provider. It then has up to eight weeks to resolve your complaint, or you can go to the Ombudsman sooner if it issues a deadlock letter. You generally have six months from the final response to refer the matter to the Ombudsman.

The Ombudsman is free, independent and decides what it considers fair and reasonable. It reviews the card provider’s handling of your chargeback or Section 75 claim; it does not deal directly with the underlying trader. A decision you accept is binding on the business. It is the natural escalation when the dispute is with how your bank or card issuer has treated you.

Small claim

A small claim in the County Court is a claim directly against the trader itself, not against a card provider. It is the appropriate route where the card-based options do not apply. That includes payment by debit card where chargeback has failed, payments outside the Section 75 range, purchases where no card was used at all, or where your loss is larger and you want a judgment enforceable against the trader.

The small claims track normally handles claims up to £10,000. Court fees are payable on a sliding scale according to the amount claimed, and although the process is designed to be usable without a lawyer, you should weigh cost, delay, stress and, crucially, enforceability. A judgment is only worth pursuing if the trader is solvent and traceable; if the trader has gone out of business, a Section 75 claim against the card provider is far more valuable than a court judgment you cannot enforce. Before issuing a claim you should send a clear letter before action setting out the breach, what you want and a deadline, in line with the pre-action expectations.

How to choose in practice

Work through it in this order.

1. Identify how you paid. Credit card over £100 points to Section 75 as the strongest route. Debit card, or a credit card purchase of £100 or less, points to chargeback.

2. If Section 75 is available, use it, particularly where the trader is insolvent or your loss exceeds the price paid. You can often ask the card provider to consider chargeback and Section 75 together.

3. If neither card route applies, or if the trader is solvent and you want a direct remedy, consider a small claim after a letter before action and any attempt at informal resolution or mediation.

4. If your card provider rejects or mishandles a chargeback or Section 75 claim, complain to it, obtain a final response or deadlock letter, and escalate to the Financial Ombudsman.

Chargeback and Section 75 are usually the first things to try because they are cheaper, faster and lower risk than court. The Ombudsman sits above them as free escalation against the card provider. A small claim is the route of last resort against the trader itself, and is most useful when card-based protection is unavailable and the trader is solvent enough to pay a judgment.

Points that would sharpen the advice

The right answer depends on facts you have not given here: exactly what went wrong with the purchase, how much it cost, whether you paid by credit or debit card, how much of the price went on the card, whether the trader is still trading, the date of the transaction or of when the problem emerged, and whether you have already complained to anyone. If you tell me those details, I can point you to the single best route and the practical steps to take first.