Credit card firms have been told by the House of Lords they must refund people who buy goods and services abroad that are undelivered or damaged.
The Lords had to decide if the law extended to purchases abroad
Five Law Lords have dismissed an appeal by Lloyds TSB and Tesco Personal Finance, who had challenged the application of the Consumer Credit Act.
Section 75 says credit card purchases between £100 and £30,000 are insured by the card issuing companies.
The Lords' decision upholds an earlier decision of the Appeal Court.
"It confirms that credit card issuers are individually and jointly liable with suppliers if a consumer has a valid claim against the supplier for misrepresentation or breach of contract," said John Fingleton, chief executive of the Office of Fair Trading (OFT).
"The application of section 75 to overseas credit card purchases has long been uncertain, which is unsatisfactory for UK consumers.
"We are pleased that the House of Lords has resolved the issue, and particularly happy that it has been resolved in a way that gives greater protection to consumers," he added.
The Law Lords said the 1974 Act gave no indication that there was any territorial limitation on the banks' obligations.
"There is nothing in the language of section 75(1) to exclude foreign transactions," said Lord Hoffmann.
Lord Hope of Craighead backed this up.
"The answer to the question whether the right of recourse under section 75(1) does extend to foreign transactions is to be found in the words of the statute, not in any presumption either way as to its application extraterritorially," he said.
"As one looks for the answer, the most striking feature is the absence of any indication in the subsection that it was the intention that it should not apply to them [foreign transactions]," he added.
Hugh Evans, of the legal firm DLA Piper, said the Law Lords had also looked at the underlying commercial situation.
"The Law Lords say it is all about the allocation of risk - who should pick up the bill if the transaction goes wrong?"
"They have come to the conclusion that the card issuer is in a much better position to pursue the foreign supplier," said Mr Evans.
The banks responded to the Law Lords' decision with disappointment, but not surprise.
"At long last we have clarity," said Sandra Quinn of the card services organisation Apacs.
"The banks now know where they stand and there is no doubt it is good for consumers."
She pointed out, though, that the banks were not concerned so much with small-ticket items that failed to be delivered.
She argued that the main problem for banks was any consequential loss - for instance, being liable for all costs in the US that might arise out of a crash in a car hired with a credit card payment.
"Legal costs there are not cheap," she said.
Martyn Hocking, the editor of Which? Money said the legal decision was excellent news.
"Foreign travel and the internet have opened up huge new markets to consumers."
"With most credit card companies, consumers already pay a charge each time they use a credit card abroad - the least they can expect is the same level of protection as they enjoy at home," Mr Hocking added.