Money: Out of pocket due to a flight of fancy: David Berry describes why some credit cardholders missed out on refunds

It seemed a good idea, as so many of these things do. When Classic Airways was launched last April from Harrogate, North Yorkshire, the bookings flooded in because what the company was offering was an instant dose of nostalgia.

From as little as pounds 40 it offered pleasure flights in a Dakota, the plane that won the war for the Allies, saved West Berlin from communism and sums up all that is elegant about early air travel. With air hostesses dressed in 1940s uniform and piped Glenn Miller music, it was an idea whose time seemed to have come

Two months later, in June 1993, the company collapsed with debts of pounds 80,000. Of the 50 Dakota flights advertised in the brochure only eight took place. Hundreds of customers who had paid the company up to pounds 165 for a flight were left firmly on the ground and out of pocket.

However, some have managed to get their money back while others stand little chance of seeing anything.

Like many other pensioners who had booked with Classic Airways, Jim Chant had flown in Dakotas in the 1940s, delivering essential supplies to the Far East. His son Mike thought a flight would make an ideal present.

Classic Airways arranged three flights for the Chants, all of which fell through. A fourth was due to take place in August last year but by then the company had ceased trading.

Mike Chant had paid the company nearly pounds 500 and he stands very little chance of getting any of it back. But it would have been a different story if he had paid by credit card because he would have been entitled to a refund from the credit card company due to the Consumer Credit Act 1974.

Indeed, all the Classic Airways customers who paid hundreds of pounds by credit card did get their money refunded in this way. But the act does not apply to purchases under pounds 100, and since many customers paid less than this they assumed that their credit card company would not refund their money. They were wrong.

Some who had paid for a flight costing less than pounds 100 did get a refund due to a mysterious banking process called 'charge-back'.

Put simply - and it is by no means simple - all companies under the Visa or Mastercard umbrella, which covers almost all British credit cards, abide by a series of rules that cover situations when things go wrong.

There are more than 100 charge-backs, and each has its own conditions. Classic Airways fell into the category that applies to travel.

This gives cardholders 180 days after the date given for their travel to make a claim, which means that for claims over pounds 100 it is best to use the Consumer Credit Act since the time limit for claims is the usual six years.

But the great advantage of charge-back is that, unlike the act of 1974, there is no minimum limit. Customers who have paid less than pounds 100 can still get their money back.

What is certain is that many credit cardholders are completely unaware of their charge-back rights and the companies do not exactly go out of their way to point it out.

Both the Consumer Credit Act and charge-back do not apply to charge cards such as American Express or Diners Club, as one Classic Airways customer, Nick Foster, found out. His sister Louise had paid pounds 500 by American Express for three flights.

They tried to claim their money back but were told they were not entitled to a refund - very odd, since American Express says that in situations like this it always refunds cardholders, even though under no obligation to do so. It has promised to look into the Foster family's claim.

The story of Classic Airways, produced by David Berry, is featured on Watchdog on Monday night, BBC 1.