The pros and cons of 'Pay By Bank'
It’s instant and doesn’t require a card – but you’ll forfeit consumer rights, says Paul Lewis.
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If you’ve bought something online recently you may have been offered a new way to pay. It’s called Pay By Bank and does not involve a credit or debit card: instead the money is taken directly by the retailer out of your bank account. Retailers like it because Pay By Bank costs a lot less than the credit or debit card charges made by Visa and MasterCard.
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The big downside for customers is that they lose valuable consumer rights. A credit card purchase of more than £100 gives you rights under section 75 of Consumer Credit Act which means the bank is equally liable with the retailer if what you buy breaks or goes wrong soon after it arrives, if it was not as it was described to you, or failed to arrive. It also protects you if the seller goes bust after taking your money. You get similar protection – called chargeback – if you pay by debit card, and with no lower limit. That is part of the contract between Visa or Mastercard and the banks. Pay By Bank gives you none of these rights – perhaps because chargeback is a dispute procedure which can be time-consuming and costly for retailers who would be glad to avoid it and leave you to rely on whatever refund policy they operate.
You do keep one important right though, even with Pay By Bank. That is the absolute right to return an item you bought online, with or without a reason, as long as you inform the retailer within 14 days of receiving it and return it within another 14 days.
Retailers say Pay by Bank payments are instant, and that if you do return an item for a refund that is also made instantly. But paying by card is pretty instant already with card numbers, expiry dates and sometimes even the three-digit code stored by your website. Even refunds are usually made swiftly.
To use Pay By Bank you must have your bank account on an app on your mobile. You choose your bank out of a list, sign into your app, approve the payment, and whoosh: off goes your order – and many consumer rights along with them. So never for big amounts or important purchases!