Other Credit Products

Other forms of credit include bank overdrafts, storecards, and Buy Now, Pay Later schemes.

Bank Overdrafts 

  • The bank will allow you to draw out or pay more money (up to a max amount) than you have in your account up to an agreed limit. You will also pay interest on the amount that you borrow.
  • If you take your account over this limit, the bank will either contact you, or refuse to pay a cheque which takes your account over the limit. This may incur a charge. If you think you are likely to go over your agreed limit, contact your bank immediately.

Store Cards

Store cards are the cards that many major retailers offer their customers as a convenient way of paying for goods or services in their stores or group of stores only. Typically a store card has a number of benefits or incentives attached eg. discounts, cardholder evenings, invitations to exclusive events.

A store card generally

  • has a lower credit limit than a credit card
  • can be used only at the issuing retailer store or group of stores
  • has a higher APR than a credit card

Store cards operate similarly to credit cards with a monthly statement being sent to all customers with the requirement to pay off at least the minimum payment by a fixed date. You should be aware that only ever paying the minimum amount on a card can cost you more in the longer term.

In assessing the value of taking out a store card, you need to consider and weigh up the costs and benefits in the same way as you would for other credit products.

Several retailers now offer branded credit cards as well as store cards. These combine the benefits of a storecard, with the payment flexibility of a credit card. See credit cards for more information.

Hire purchase and lease purchase

  • These are arrangements whereby you buy an item (usually household goods or cars) and a hire purchase company pays for the goods. You pay a set monthly amount to the hire purchase company.
  • The hire purchase company is the legal owner of the item as long as you have an outstanding balance.
  • If you default on repayments, the item can be repossessed.
  • The interest charge is usually higher than on a mortgage or loan as the goods are portable and depreciate quickly.

Buy Now, Pay Later offers

  • Under this option, the retailer has an agreement with a finance company — either an independent one, or its own — to finance the period over which payment of the good is delayed.
  • The purchased item is legally owned by you in those circumstances