Interest Free Credit ?

Like most photographers I monitor many adverts to check prices to see if its worth upgrading / replacing my kit and have often used interest-free credit ( ifc ) to buy the more expensive items.

Last year my Jessops ifc purchase was handled by Barclays Finance who attempted to charge me £25:00 fee which I challenged; the operator apologised and said that following recent takeover of the finance company by Barclays they had sent out the "wrong" form but my record would be updated to show that "as it was an interest-free purchase no additional sums should be charged".

I left it at that but at settlement time a few days ago the "settlement fee of £25:00" was noted but dropped when I pointed out the response from my initial query a year earlier. I have now paid the full outstanding debt only but I have been made aware that advertised offers in 2009 for "Interest free credit" also draw attention ( in the small print - surprise surprise ) to a settlement fee which is appararently set at £25:00.

Now of course this is not interest but it may appear under various guises I suspect to - effectively - provide an interest for the finance company which has already profited by discounting the price with the original supplier.

The way this works is shown by considering the purchase of camera gear costing £1000:00. The seller offers ifc and the buyer walks off with the goods; the supplier receives 90% ( for example ) immediately from the finance company which now takes over the debt ( i.e. the supplier gets £900:00 of the money which equates to a 10% discount to the buyer which the seller is prepared to lose in order to gain the money whilst the finance company is prepared to give the £900:00 because it is guaranteed a return of £100:00 = 11% at the end of the ifc period.

Given the recent greed shown by the banking system it now appears to be extending its greed to the small print of ifc sales so I would advise anyone considering this form of purchase to check the small print very closely.

A point to remember - the law states quite clearly that once a contract is enacted no conditions ( e.g. settlement fee or equivalent ) can be imposed unless the buyer was made aware of them before completing the purchase.

A friendly caution as the Government seeks to encourage spending whilst the finance industry seeks even more ways of rooking the customer.

 

This is an old trick well practised by offers of interest free credit such as PC world.

Always read the small print - no matter how boring it may seem.

Remember : If something seems too good to be true, it normally is.

 

Just had a look on Jessops website and their "settlement fee" has now increased to £29 if you pay the amount owed during the "interest free" period, so you did alright there Fred if you managed to get them to drop the £25 they wanted.

I've never entered into one of those "buy now pay later" deals, but from what I understand of them, the finance companies rely on a certain percentage of the people who take them out not settling the by the end of the "interest free" period - as soon as go on to the day following the date the amount should have been repaid you go onto - in the case of Jessops - 36 months at 29.8% APR, which essentially will cost you a big wedge of cash in interest payments. To quote the Jessops website, a loan of £1369 will cost you in total £2534 if you stray into the 36 months pay off period.

So that means that the equipment that you could have bought somewhere cheaper on the web in the first place will have have cost you almost double the Jessops purchase price if you're not careful.

So the main point to bear in mind with these types of credit agreements is to make sure that you pay off the full amount within the agreed period - unless you can afford to pay almost almost 100% interest!

Rather unfortunately, I expect everyone will have seen that Jessops are in difficult financial circumstances at the moment. Having declared a £49.8 million loss in the year to the end of last September, their bankers HSBC won't lend them anymore money - not even on interest free! They also owe HSBC £57.4 million. Presumably the future of Jessops is down to the Canada Square mob.

Regards

Andrew

 

I was under the impression that there is a maximum you can pay each month off a credit card with a 0% interest rate. Then after 6 or 12 months later you start paying the rest off with interest. With a rate of about 22%. Also don’t forget some of these credit cards have a minimum spend per month and if you don’t spend the minimum amount per month then there is a penalty to pay. All I can say is read the small print first before takeing a 0% interest rate card on. There is always a catch with these types of credit cards. No one gives you free money.

 

I hope jessops don't go under, its nice to have a high street camera shop