Iona Bain
Strapped for cash but determined to grab that must-have item? The first instinct is to whip out the credit card but many retailers would like you to consider another way.
Retailers like Dorothy Perkins, Next and Very.co.uk throw all sorts of juicy discounts at you if you sign up for their in-house credit scheme.
But signing up comes with a high price if you fail to pay back what you owe. We check out the main benefits and drawbacks of these accounts, and ask whether there are better ways to buy now, pay later.
What are credit accounts?
Ever been offered a store card at the till when you’re paying for your stuff? Or told that you can “pay nothing today” online? And get a 10% discount on your first purchase? Chances are you’re being persuaded to sign up for store credit.
These cards are offered by a range of retailers, from shopping websites and catalogues to regular old high street chains. They work much like a credit card – you’re given money in the form of credit to shop straightaway.
The only difference is that the account can usually only be used with that particular retailer (and no-one else). Sounds amazing, but this ain’t free money.
Taking out store credit triggers an “outstanding balance”, meaning you have to pay back what you have borrowed at some point in the future. Technically, you’re now in debt, with all the usual rules – and risks – that brings.
There is often another aspect to credit accounts which sounds incredibly appealing – spread your costs so that you don’t have to pay it all upfront. That might be particularly helpful if you’re buying a laptop, washing machine or any other item that strains your budget.
But this has a sting in the tail in the form of interest, which you have to pay on each instalment. So it can be far more expensive in the long-run than coming up with the readies straightaway.
There are some exceptions, like Very’s Take 3 scheme which allows you to pay no interest if you choose to spread the cost of your shopping trip with them over three months.
Read on here to find out why these cards AREN’T loyalty cards and what the real cost of this option is.
