Consumer rights expert Martyn James explains what you need to know about the rise of businesses asking you to pay your cash straight into their bank
The way we shop has changed dramatically over the years. From contactless payments to online shopping, it’s become incredibly easy to buy everything from essentials to gifts.
While these technological advances are wonderfully convenient, they also lead to a whole range of problems. Fraudsters are constantly trying to trick us in to sharing our details.
Dodgy scammers are lurking on legitimate websites, hoping to part us with our cash. There are tons of genuine online retailers selling us rubbish quality clothes. And even legitimate businesses can go under, taking your money with them.
I hate having to say this, but we all have to be a bit more cautious when we buy things online or in person. But the way you pay for goods and services can give you an extra layer of protection if things go wrong – or not. Here’s my guide.
The problem with ‘pay by bank’
In the last few weeks, it’s become apparent that many big online retailers are offering you a new way to pay for goods: pay by bank.
This may seem to be another quick and easy way to pay for goods – but don’t be fooled. Pay by bank is another name for a bank transfer – where you pay for goods directly out of your bank account.
We often use bank transfers to send money to friends or family. But when you’re paying for goods or services, you should never use this option.
That’s because bank transfers cannot usually be recalled if there’s a problem or dispute with the retailer. This is the most common method used by fraudsters to trick you out of your cash through things like fake holiday rental scams too.
There are exceptions for the big money scams – known as Automated Push Payment fraud (APP). This is where you are tricked in to sending large amounts of cash to fraudsters.
There is a whole scheme in place that can help you get back up to £85,000 (or more) if this happens so please seek help immediately if you are a victim of this crime.
However, when it comes to normal, day to day transactions, a bank transfer can’t usually be recalled unless there are exceptional circumstances.
What’s concerning me about the push to get us to pay this way is – according to this sterling research from the team at MoneySavingExpert – major retailers like Amazon and Ryanair are offering pay by bank as an option at the checkout now.
While I can’t second guess why they are doing this, it’s hard not to conclude that some retailers are making it harder to get your money back if you make a complaint about something you’ve purchased and they refuse to refund you.
If you pay by debit or credit card, you can potentially ask the card provider to get your cash back. So clicking on the pay by bank option doesn’t benefit you in any way.
So what are the different ways to pay and how can they protect your purchases?
What are my rights if I pay by debit card?
Debit cards are the most popular way to pay for things in the UK. According to UK Finance, the trade body for financial services, we made over 26.1 billion debit card payments in 2024 – half of all payments.
There are two words to remember if you’ve paid for goods or services with a debit (or a credit) card: ‘charge back’.
Chargeback is one of the most important services when it comes to how we pay for things. If you’ve been tricked or scammed in to making a payment, or if things you’ve purchased haven’t turned up, or even a business looks like it’s going to go bust, you can call your card provider and ask them to charge back the money.
Chargeback hit the news over the pandemic when retailers became reluctant to refund people for things like holidays or other activities that we couldn’t take part in due to being confined to our homes.
As a consequence, chargeback is now under attack on various fronts from some retailers. If there’s a dispute over the quality of goods or services and it’s not black and white, then you may find the chargeback request is turned down. But where things are a little clearer, it’s the best way to get your money back.
This is an industry-run scheme, so it’s not the law, but it is considered to be ‘good practice’ – and you can go to the Financial Ombudsman about disputes if you’re not happy.
As with everything though, there are caveats. There are time limits for making a claim, usually 120 days from the date you make your purchase (this varies with some card providers).
As I mentioned, complaints over the quality of goods can be subjective. If it’s not straightforward, you might get sent back to the retailer to sort out the problem.
Chargeback won’t generally work when a retailer has officially gone bust, but if you’re reading the news in the Mirror and it looks like a business will go under and you get your chargeback request in quickly, you might get lucky.
What are my rights if I pay by credit card?
In addition to the wonders of chargeback, the best way you can protect your purchases is to pay on a credit card. However, only if you spent over £100 and under £30,000. And it goes without saying that you should pay off the debt before interest is applied (usually at the end of the month).
Under the Consumer Credit Act, you can claim your money back from your card provider using what’s known as a ‘section 75’ claim if the goods are misrepresented, don’t work or don’t turn up.
Once again though, there are lots of quirks and caveats so don’t assume your claim will always be accepted.
The most common clause in the act is known as the ‘debtor-creditor-supplier’ agreement. This is super complicated to explain, but in short, you can only usually make a claim from the card provider if you bought the goods or services direct from the retailer.
This may seem straightforward, but if you buy via a third-party site, like an online travel marketplace, or even using PayPal, then you are likely to not be covered by section 75 protection. I say ‘likely’ because this is very much under debate right now with a consultation on the reform of the law underway, but if in doubt, buy direct.
One extra bit of section 75 protection concerns deposits. If you pay any amount of money on a credit card as a deposit and the rest by some other method, you can potentially claim the whole sum back if there’s a dispute.
So you could, in theory, pay a £50 deposit on a car that costs 10,000 and still be able to claim £10,000 if it turns out you’ve been sold a duff vehicle and the firm refuses to refund you.
What are my rights if I pay for goods or services by a bank transfer?
Online banking has made bank transfers incredibly easy, with many people using their phones to transfer cash or buy things each day. As well as ‘pay by bank; you’ll often see this referred to as ‘remote banking’ or ‘easy payments’ – but basically, it’s making transfers from your account online, through your phone or through an app.
The number of bank transfer/remote banking payments increased to 5.6 billion transactions in 2024 according to UK Finance – which makes this payment method the second most used way to pay for things.
But beware! Bank transfers are the favourite method scammers use to part you from your cash. In the most severe cases, scammers committing APP fraud often con people in to transferring their life savings using bank transfers.
As soon as the money hits the fraudsters account, the cash is syphoned off in smaller chunks to other accounts, never to be seen again. There is a (very) small window of opportunity to call your bank and get the cash back. But speed is of the essence.
So why can’t banks recall your cash even for smaller amounts, if you think you’ve been tricked? It’s because when you transfer money, there’s often no way to prove that it’s not actually a genuine transaction and you’ve simply decided to back out of the agreement.
You should always speak to your bank as soon as you realise you’ve been tricked. Even if you’ve sent money to the wrong account by accident – the so-called ‘fat finger fail’ – there may be occasions where they can speak to the other bank on your behalf to see if the money can be returned.
But as a general rule, only use bank transfers to pay money to people you know. And don’t click through all the warnings online without reading them.
What are my rights if I pay using PayPal or other e-payment services?
E-payment services act as a protected way to make payments between you and a retailer. They rose in popularity as a way to buy and sell goods with individuals and smaller businesses who don’t want the faff and the expense of paying to process debit and credit cards.
But thanks to their encryption and anti-fraud measures, they are enormously popular. E-payment services are regulated and complaints are dealt with through their own dispute resolution schemes.
However, there are lots of complaints about these dispute resolution schemes and some of the rules. Some people have reported e-payments firms freezing accounts without explanation or spending months to investigate some complaints.
Nevertheless, paying using an e-payment business gives you more protection than you’d get from making a bank transfer.
There are still ways that fraudsters can work the system though. PayPal’s ‘friends and family’ option, is a way for you to transfer money to those close to you but without the processing fees.
However, this type of payment works in the same way as a bank transfer. So when the money has gone, it’s gone – and it’s not covered by PayPal’s dispute resolution service, leaving you nowhere to turn.
Many scammers try to trick people to use the friends and family function to make payments for goods by offering you discounts in ‘saved fees’, so beware of anyone asking you to do this.
What are my rights if I pay by cash, cheque or wire transfer?
If you use an international transfer service like Western Union, wave goodbye to that money, because once you’ve sent it, it’s not coming back. This method of transfer is beloved of fraudsters, often in scams that suggest friends or family members are in trouble or stuck abroad. Be wary.
Cash may be making a resurgence, but remember that you can’t prove you made a purchase unless you retain a receipt. Keep an eye on that change too for foreign or fake coins or notes.
If you’ve not banked a cheque for a while, you may be surprised to learn that thanks to the ‘Image Clearing System’ (ICS) you can actually use a photo or scan of your cheque to pay the item in to your account.
But loads of retail scams rely on the traditional clearing system, which means if you release goods you’ve sold before a cheque has officially cleared, then you could lose the cash. The clearing cycle is known as the 2-4-6 system:
- After the first two days you start earning interest.
- Four days after depositing you can withdraw and spend the cash.
- But it’s not until day six that you can be sure the cheque has cleared.
But cheques are not a good way to buy or sell goods from or with strangers. Stick one in a Christmas card instead and confuse the kids.
- Martyn James is a leading consumer rights campaigner, TV and radio broadcaster and journalist
