Retailers are keen to advertise 0% interest ‘buy now, pay later’ offers in the run-up to Christmas. While these deals can provide useful financial relief for hard-up families, are they really as helpful as they appear?
If managed well, the ‘buy now, pay later’ deals can be a useful way to help spread the spiralling costs of Christmas.
But beware; if you don’t keep your eyes on the upcoming payments, you could end up in repayment misery.
Watch out for these finance pitfalls
Earlier this year we revealed that if you miss a payment, some retailers will charge interest on the whole balance backdated to the date you ordered.
For example, at the time of research we found that buying £350’s worth of jewellery on Argos’ 12-month ‘buy now, pay later’ deal would be interest free if you repaid all of it within 365 days. But if you were just a day late you would have incurred interest of 29.9% on the whole balance due. That would’ve been more than £100.
Littlewoods also offers ‘buy now, pay later’ deals and was recently criticised for selling items at higher prices compared to buying the items upfront from other shops. The moral of the story is to always shop around and read all the details before signing up to these deals – and not to be drawn as soon as you see ‘0% interest’.
Handy alternatives to ‘Buy Now Pay Later’ deals
You can create your own ‘buy now, pay later’ deals with any retailer if you invest in a 0% purchases credit card.
These cards charge no interest on purchases made during the first few months of owning the card, provided you meet the minimum monthly repayments. So, you’re likely to save money by applying for a Best Rate 0% purchases credit card and using it to buy the product at the cheapest price available.
Whatever form of credit you use, it’s essential to create a repayment plan that you can stick to in order to avoid excessive interest charges.
Consider setting aside a certain amount each month and placing it in a savings account so you can cover the full amount due at the end of the interest-free period.
Have you been caught out by a ‘buy now, pay later’ deal? What’s the biggest late repayment penalty you’ve encountered? What do you think is the best way to fund big-ticket Christmas purchases?