Interest Free Credit. What is the point?

[vinyl]

So is buying with 0% finance. The store get paid in full, just like you paying with a credit card.

 

I find that very difficult to believe. I imagine that the credit company want a fair slice for risking their cash and all the red tape and paperwork that goes into it just likthey do with a credit card.

[Cyclone]

If that were the case do you think that shops would push that method of payment so strongly? More than likely it's entirely the opposite.

[Swampster]

So you can't offer a discount for cash, but you can just offer that customer a discount (knowing that they intend to pay with cash anyway).

 

Not if it's advertised as being available for a certain amount on interest free credit. They are not allowed to sell the item concerned for anything less than the credit amount until the credit offer is totally rescinded.

 

Now I'm not sure which law it is, but I did check up on this a few years ago becasue of a situation not disimilar to the OP's. Basically a 3 piece suite for sale at whatever price it was on credit, and it was actually more expensive for cash, which to me sounded completely bonkers.. and wrong. I argued with the store but they were adamant there was nothing they could do about it, so I checked with Trading Standards.. and they were indeed correct.

 

Imagine it if you had bought an item on interest free credit for £1000, then another customer rocks up and says I'll buy the same item for £800. You'd have a legitimate claim that the credit was not interest free... unless of course they wee willing to reduce your total credit bill to £800 too (in which case they would have to advertise the fact they would be willing to do that). And so the cycle begins.....

[L00b]

I find that very difficult to believe. I imagine that the credit company want a fair slice for risking their cash and all the red tape and paperwork that goes into it just likthey do with a credit card.

More a case of the retailer taking on a sizeable credit at a very low % over a fixed period of time, then dividing the credit out betwen x products offerred at 0% (the retailer pays the APR>0 to the credit company, and factors the APR cost of the credit in its costs/overheads per product), with relevant paperwork in the background.

 

Swings and roundabout in the end - if there was nothing in it, noone would offer such deals. That's why, from a customer PoV, the hows/whys/etc. of 0% deals matter little in the end. As I first posted, so long as you want that product from that retailer and you're happy paying the price it's being sold at (with or without discount, doesn't matter), 0% is worth using even when you have the cash ready at hand.

[Cyclone]

Not if it's advertised as being available for a certain amount on interest free credit. They are not allowed to sell the item concerned for anything less than the credit amount until the credit offer is totally rescinded.

The credit offer is surely just an invitation to treat. They can sell the item for whatever price they like, so long as they are prepared to sell on credit at the same price. So if someone has already said they wish to pay cash then they can set a new price (which in theory includes on credit as well), they are unlikely to run into any legal problem this way.

 

Now I'm not sure which law it is, but I did check up on this a few years ago becasue of a situation not disimilar to the OP's. Basically a 3 piece suite for sale at whatever price it was on credit, and it was actually more expensive for cash, which to me sounded completely bonkers.. and wrong. I argued with the store but they were adamant there was nothing they could do about it, so I checked with Trading Standards.. and they were indeed correct.

Hmmm, they aren't obliged to sell it for cash as cheaply as credit, but that doesn't mean the law was stopping them.

 

Imagine it if you had bought an item on interest free credit for £1000, then another customer rocks up and says I'll buy the same item for £800. You'd have a legitimate claim that the credit was not interest free... unless of course they wee willing to reduce your total credit bill to £800 too (in which case they would have to advertise the fact they would be willing to do that). And so the cycle begins.....

Ah, no I doubt it works like this, each purchase is a separate transaction. I suspect (without having read the law) that the requirement is that if credit is available it can't be at worse conditions than if you buy for cash. I suspect that it doesn't compare between transactions, but only applies to the single transaction.

Otherwise how could a company like DFS ever have a sale. They sell the majority of their sofa's on credit, your interpretation of the law would make it impossible for them to reduce the price, ever.

[Swampster]

Also bear in mind often is the case that not all items available on credit within a store are available at 0% there's usually a few 'crowd pullers' at 0% and the rest are standard APR.. all with the same credit company of course. The 0% could be seen as loss leaders in that respect, as the finance company makes up the money from the other deals.

[Swampster]

Otherwise how could a company like DFS ever have a sale. They sell the majority of their sofa's on credit, your interpretation of the law would make it impossible for them to reduce the price, ever.

 

By rescinding previous credit offers on said item? Or offering the same items on credit terms that are equivalent to the same cash (sale) price?

 

Whatever, I'm not here to argue.. i'm just re-itterating what Trading Standards told me, and frankly I'd bow to their expertise on the matter.

[vinyl]

If that were the case do you think that shops would push that method of payment so strongly? More than likely it's entirely the opposite.

 

They push it because it is a gimmick that appeals to the majority of customers, most of whom buy everything on tick and think they are getting credit for nothing.

In actual fact the credit charges are spread over all customers including cash customers who are expected to pay a premium over what would be the actual price to subsidize credit that they neither need nor want.

[willman]

I find that very difficult to believe. I imagine that the credit company want a fair slice for risking their cash and all the red tape and paperwork that goes into it just likthey do with a credit card.

 

Thats an agreement between the two companies not the buyer and the store. If i stood next to someone getting £'s discount for cash i'd be complaining if i was paying by credit card or using 0% finance.

[Cyclone]

Also bear in mind often is the case that not all items available on credit within a store are available at 0% there's usually a few 'crowd pullers' at 0% and the rest are standard APR.. all with the same credit company of course. The 0% could be seen as loss leaders in that respect, as the finance company makes up the money from the other deals.

 

I refer you to DFS again, all our sofas on 0% finance for 4 years and pay nothing for the 1st 3 years.