Which? reviews the ‘buy-now pay-later’ deals from leading high street retailers and shows you how to avoid the main credit pitfalls.
In-store 0% deals can be a great way to spread the cost of big purchases, so long as you follow a few basic rules to avoid coming a cropper this Christmas.
- Don’t spread the cost of credit over a longer period than you expect to keep the item. For example, if you buy a new sofa every two years, you shouldn’t spread the credit over more than 24 months. Otherwise you’ll still be paying for something you’re no longer getting the benefit of.
- Some retailers are currently advertising that you can beat January’s VAT hike by buying now. However, prices are likely to plummet in the January sales, more than wiping out the VAT increase. Saving 2.5% in VAT now could cost you hundreds compared with the new price in the sales, so it may be worth hanging on.
- Not all stores offer credit at 0%, so make sure you check. Just because the poster says ‘buy now, pay later’, doesn’t mean the deal is interest-free.
- Make sure you set up a direct debit for the monthly payment. If you break the contract by missing a payment, you may have to pay interest and penalty charges.
The deal: Up to four years interest-free credit. Pay nothing for the first year.
Which? verdict: An excellent offer that is available on all items in-store, subject to credit checks. If you’re thinking of paying in full now, it’s worth considering taking advantage of the 0% credit deal and putting your cash into an instant-access Best Rate savings account instead. Once the initial 12-month period is up, you can withdraw enough cash each month to make the sofa repayment, leaving the rest of the money to earn interest in your savings account.
The deal: 12 months interest-free credit on kitchens and installation when you spend over £1,500. 24 months interest-free credit on kitchens and installation when you spend over £3,000.
Which? verdict: If you’re spreading the cost over two years, this deal is worth considering. However, if you’re looking for a 12-month deal, you’d do better with a Best Rate 0%-on-purchases credit card. Tesco currently offers a 0% period of 13 months on its credit card – you’ll also earn Clubcard points on your purchase and enjoy valuable section 75 protection.
The deal: ‘No hassle credit. low weekly payments. No deposit.’ Typical APR 29.9%.
Which? verdict: Avoid if possible. The very high APR of 29.9% means you’ll be paying off your purchase for much longer than under a 0% deal available elsewhere. You’re also likely to be paying a higher basic price than you could get elsewhere online or on the high street. If you’ve got a good credit file, you’d be much better off with a a Best Rate 0%-on-purchases credit card. If you’ve got a bad credit history, or no credit history at all, you’ll probably get a better deal at your local credit union. For find your local credit union, visit the British Association of Credit Unions’ website.
The deal: Pay six months later on purchases of £95 or more. Pay nine months later on purchases of £295 or more. Pay 12 months later on all furniture over £199. 12 months interest-free credit on selected jewellery items over £250. Two years interest free credit on selected kitchens
Which? verdict: The Argos credit deals are unnecessarily complex. The first three ‘buy now, pay later’ deals could be worth considering, but only if you will definitely pay off your bill in full before the promotional period runs out. If you don’t, you’ll be charged interest at a hefty 29.9% APR. And what’s worse, the interest will be backdated to the date of purchase, even if you miss the deadline by just one day. The interest-free deals, by contrast, are definitely worth considering, although they are offered on a very restricted range of products.
The deal: Interest-free credit of up to three years, depending on the item value. A deposit of 25% is payable when you order. Repayments start a month after delivery.
Which? verdict: If you’re buying a relatively low-cost item with a 0% deal of 12 months or less, you’d be better off with a Best Rate 0%-on-purchases credit card. For longer periods, the 0% deal from Furniture Village is worth considering, but many consumers will be put off by the 25% up-front deposit, which is less generous than the deals available elsewhere.
The deal: 12 months interest-free credit on purchases over £1,000. Up to three years interest-free if you spend over £1,700. ‘Buy now, pay later’ deals of up to 12 months.
Which? verdict: The interest-free period of up to three years is definitely worth considering, although over 12 months you may be better off with a Best Rate 0%-on-purchases credit card. Avoid the ‘buy now, pay later’ option – even though it will give you a breathing space of between six and 12 months before any repayments are due, interest is charged at a very high 29.8% APR over the 3-year repayment period.
Get free cash on your credit card instead
To find out how you could pay spread the cost of Christmas interest-free, as well as earning money on your shopping, read our news story Pay no interest for a year on Christmas shopping.
To earn extra credit card rewards on your credit card spending over Christmas, read our news story Get up to 5% rewards on your Christmas shopping.
For details of many more reward and airline credit cards, read the Which? reward credit card reviews.
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