How to ensure you don’t fall into hidden borrowing traps
WITH Christmas on the horizon, many of us are doing our best to keep on top of our finances. But did you realise you might be borrowing money without even realising it?
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.
Now 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.
Most major online retailers offer interest-free periods and options to pay in varying instalments – 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 your bill becomes due slightly earlier every time.
Your flexible friends can be really useful in an emergency, like getting stranded abroad, and can give you a number of consumer rights if you’re spending more than £100 and there’s a dispute with the supplier.
But credit cards require discipline
– and many of us just don’t have it.
Also 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.
A massive 85% of car finance deals are hire purchase, which has morphed in to ‘PCP lending’.
These deals are hugely complex so don’t get talked in to overspending by the salespeople. Watch out for the terms and conditions too – you can be charged for everything from minor damage to going over mileage limits.
Isn’t it nice of some retailers to introduce ‘try before you buy’ schemes that 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.
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. Anyone can get caught out with hidden debt
■ Resolver can help sort out your complaints for free. See resolver.co.uk or share your experiences at yourstories@ resolvergroup. com