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Catalogue purchases are not just for Christmas…
As we get closer and closer to Christmas, retailers are gearing up for their busiest period where they are hoping for sale after sale. With so many different ways to buy products for Christmas, catalogues still manage to maintain a decent market share but they can be a risky option for many.
The ‘Buy Now Pay Later’ option available to catalogue customers can be a useful tool to help you spread the cost of products and presents over a few months. If you manage to pay the full cost in the time period, you will not be charged interest. However, if you don’t keep up repayments you could be hit with high interest rates pushing up the price of monthly payments.
Catalogue purchases can be a good way of dealing with the financial strain of Christmas over a longer period of time but unless you are able to pay off the borrowing within the three, six or 12 month time period, it can end up being more costly. This is because interest on goods bought from catalogues is typically higher than those bought with credit cards.
Catalogue companies have been around for decades and have been successful due to the flexibility they offer their customers but their move to operating online as well has seen a rise in the amount of people buying from them. Traditional catalogue brands such as Freemans and Littlewoods are being joined by online only brands that work in a similar way like Very, SimplyBe, Jacamo and Curvissa.
Many people open accounts with catalogue companies as a result of the incentives they have on offer. Usually if you open a personal account with these companies they will offer you a discount on your first order, free delivery etc.
Comparison website, money.co.uk, is worried that catalogue credit is catching many people out because it is confusing. They warned that some catalogues are charging as much as three times the typical credit card APR of 22.8% and they described the way the costs are set out to be as ‘clear as mud’.
To reiterate how high these APR costs are, The Guardian recently reported that typical interests rates are: Very – 39.9%, JD Williams (Jacamo, SimplyBe, Fifty Plus etc) – 58.7%, Studio – 48.9%, Argos – 29.9%.
These sorts of figures of interest can hit catalogue customers very hard as being just one day over the payment period can see nearly half of the money owed added onto the amount outstanding. The interest is not just added on from the moment you miss payment, it is backdated to day one of borrowing and accrues interest until fully paid.
A spokesperson for Shop Direct, which owns Very, spoke to The Guardian about Buy Now, Pay Later (BNPL); “Our BNPL options, at terms of six, nine or 12 months, allow customers to budget by making payments of any amount at any time to suit them… The APRs we offer are competitive, and are based on customers’ individual circumstances and their credit risk profiles.”
There are low cost payment options available for some catalogue customers allowing them to pay a minimum of £5 or 7% of their balance a month. However, doing this would mean that a significant chunk of interest is added to the balance of the account and it could take years to pay off.
By comparison, credit cards also take years to pay off but as interest rates are significantly lower, the amount of interest due to pay back doesn’t add up to quite as much.
The Money Advice Trust is one of a number of debt charities currently warning the public about the high costs of debt from catalogues. It has warned about the casual language surrounding repayment methods and it has also revealed that around one in 10 callers to the National Debtline have problems with debt from catalogue companies.
However, you decide to buy your presents this Christmas make sure you can afford what you are paying for. Buying on credit may help to spread the cost of Christmas to make it easier for you now but it can cause a headache for many in the future with high interest rates and months upon months of debt repayments.
If you do choose to pay on credit, whether with credit cards or catalogues, make sure you are aware of the interest rates and the terms and conditions before borrowing, buying and committing yourself to lending.
References and further reading
Catalogue image – http://www.recyclenow.com/what-to-do-with/catalogues