Lenders and retailers have become crafty when it comes to offering us credit. They know we’re sceptical of high interest rates and rip-off deals so they’ve found ways to lure is in to deals that could trap us in to expensive interest regardless. Here’s what to watch out for.
These cards have been rebranded as ‘discount cards’ by many retailers. If you get to the till and are asked if you want to take advantage of a 10% discount offer by signing up for a card then it’s actually a high-interest storecard they’re flogging you in disguise. If you want to take the discount, pay the full balance off the card asap. Interest can reach up to 40% if you don’t.
If you think catalogues vanished with Littlewoods, think again! Most major online retailers offer deals that work in the same way. Interest-free periods and options to pay in varying instalments are all designed to lull you in to a false sense of security. The retailer is gambling that you won’t pay off the balance before the interest kicks in – and they’re usually right. They also take ‘minimum’ payments that don’t clear the balance in time to avoid interest too. Finally, payment dates often work on a 28-day cycle rather than on a set date each month, which means you’re bill becomes due slightly earlier every time.
Your flexible friends can be really useful to tide you over in an emergency, like getting stranded abroad. They can also give you a number of consumer rights if you’re spending over £100 and there’s a dispute with the supplier. But credit cards require discipline – and many of us just don’t have it, despite our best intentions. Be very careful about leaving your credit card on ‘virtual wallets’ like Apple Pay or PayPal. With a few clicks you can spend a fortune without realising how much debt you’re running up. And interest rates are creeping ever higher too.
Isn’t it nice of some retailers to introduce ‘try before you buy’ schemes? These schemes let you order items, try them (within reason) then return the ones you don’t want to keep. But wait, wasn’t that what people were doing anyway? And how come a payment services company like Klarna is handling the money? TBYB is another way to lure you in to expensive bills. It works because retailers know we’ll get tardy about returning items. And as soon as you stray over 30 days, you can get hit by big bills – and black marks on your credit too.
Formerly known as payday loans, the industry has rebranded after years of bad publicity. The adverts are back all over TV and the products are everywhere. The interest rates may have come down from annual highs of 2,000% but they’re still huge.
The golden rule is be sceptical if you don’t have to pay straight away. Chances are there’s some hefty interest waiting in the wings. But if you do get ripped off by a retailer, make a complaint – it’s free and credit complains can be looked at the financial ombudsman too.