What You Should Know About "buy Now, Pay Later" Plans
- Date: 2008-09-10 - Word Count: 843
Share This!
These days we are exposed to an increasing number of television and newspaper advertisements for "interest free" or "buy now, pay later" offers. These types of promotional products are usually offered by major retail chains such as Harvey Norman, Domayne and Freedom Furniture. These stores sell the latest-and-greatest homewares and electrical products, from lounge suites and bedroom settings to plasma televisions and surround sound stereo systems.
In essence, financial agreements established with these retail chains can be likened to an "interest free" loan. Whilst the "loan application" is submitted via the retail operators, the loan will be linked to a finance company. In Australia, it is more than likely that the finance company will be GE Money, which is responsible for both the Buyer's Edge and CreditLine lending programs. Financial institution, HSBC, also introduced a similar "retail lending" product earlier this year. For these types of "loan agreements" the terms are usually between 6 and 24 months.
In most cases these "interest free loan" products are also linked to a store credit card. There are various versions of store credit cards that exist in the market at the moment with different conditions depending on which store you purchase from and which product you sign up for.
Some examples of different types of store credit cards include the Coles Myer Source card, the GE Money GO MasterCard and the David Jones card. The Coles Myer and GE Money cards are referred to as "dual cards". This means that cardholders can take advantage of specific in-store "buy now, pay later" or "interest free" promotions but can also use it as they would a credit card, to make purchases at various other locations. Conversely, the David Jones card is a traditional store credit card, in that it can only be utilised within David Jones stores.
The two most common versions of this type of promotional offer are described as:
1. "Interest free" - this arrangement requires the purchaser to make regular monthly payments over a specified period.
2. "Buy now, pay later" - with this offer the consumer is not required to repay the full cost of the purchase until the end of the promotional period. What is not always made obvious in the promotional advertising is that the purchaser is still required to make minimum monthly repayments in addition to an ongoing monthly "account keeping" fee prior to the end of the specified period. Additionally, higher repayments can usually be made if the consumer so chooses.
For consumers looking to get the latest technology or the newest trends but cannot afford to purchase them outright, "buy now, pay later" plans and "interest free offers" can provide an achievable alternative.
One of the main points to remember is that if the full purchase amount is not paid off by the end of the specified period the outstanding balance immediately begins to accrue interest charges. Most of these retail "loans" have an interest rate of between 25-30 percent so it is important to be diligent with repayments in order to avoid any unnecessary and unwelcome charges. Be cautious and ensure that you crunch the numbers for your particular agreement, as in most cases simply paying the minimum amount every month will not see the bill settled in time. It is wise to make regular monthly repayments rather than leaving it until almost the end of the term and hoping that you have a lump sum of funds to pay it off in time.
It is also important to be aware of any extra fees that are associated with the product that you sign up for as some have monthly account fees and even one-off establishment fees in some cases.
If you feel that you may not be disciplined enough to make the repayments in time it may be a good idea to look at taking out a personal loan through a financial institution instead. The interest rates for unsecured personal loans are generally much lower than those charged on the "buy now, pay later" plans.
Another alternative may be that you have a low-interest account that you can transfer the outstanding balance to at the end of the term, to avoid paying the inflated rates.
One of the other traps to be aware of is related to multiple purchases. Once you are issued with a store card it is at your disposal to purchase multiple items from various in-store promotions. This complicates the repayment process somewhat as it is not possible to direct your funds to a particular loan. This is a risky choice, particularly if you are not 100 percent confident in your ability to correctly calculate owed monies and associated costs, and could result in a lot of unnecessary extra fees and charges. Again, if you are looking to make multiple purchases it may be wise to explore the option of a personal loan.
The team of accountants at The Quinn Group are available to offer financial and accounting advice to individuals and business. If you have a query or would like more information please contact us on 1300 QUINNS or click here to submit an online enquiry form.
In essence, financial agreements established with these retail chains can be likened to an "interest free" loan. Whilst the "loan application" is submitted via the retail operators, the loan will be linked to a finance company. In Australia, it is more than likely that the finance company will be GE Money, which is responsible for both the Buyer's Edge and CreditLine lending programs. Financial institution, HSBC, also introduced a similar "retail lending" product earlier this year. For these types of "loan agreements" the terms are usually between 6 and 24 months.
In most cases these "interest free loan" products are also linked to a store credit card. There are various versions of store credit cards that exist in the market at the moment with different conditions depending on which store you purchase from and which product you sign up for.
Some examples of different types of store credit cards include the Coles Myer Source card, the GE Money GO MasterCard and the David Jones card. The Coles Myer and GE Money cards are referred to as "dual cards". This means that cardholders can take advantage of specific in-store "buy now, pay later" or "interest free" promotions but can also use it as they would a credit card, to make purchases at various other locations. Conversely, the David Jones card is a traditional store credit card, in that it can only be utilised within David Jones stores.
The two most common versions of this type of promotional offer are described as:
1. "Interest free" - this arrangement requires the purchaser to make regular monthly payments over a specified period.
2. "Buy now, pay later" - with this offer the consumer is not required to repay the full cost of the purchase until the end of the promotional period. What is not always made obvious in the promotional advertising is that the purchaser is still required to make minimum monthly repayments in addition to an ongoing monthly "account keeping" fee prior to the end of the specified period. Additionally, higher repayments can usually be made if the consumer so chooses.
For consumers looking to get the latest technology or the newest trends but cannot afford to purchase them outright, "buy now, pay later" plans and "interest free offers" can provide an achievable alternative.
One of the main points to remember is that if the full purchase amount is not paid off by the end of the specified period the outstanding balance immediately begins to accrue interest charges. Most of these retail "loans" have an interest rate of between 25-30 percent so it is important to be diligent with repayments in order to avoid any unnecessary and unwelcome charges. Be cautious and ensure that you crunch the numbers for your particular agreement, as in most cases simply paying the minimum amount every month will not see the bill settled in time. It is wise to make regular monthly repayments rather than leaving it until almost the end of the term and hoping that you have a lump sum of funds to pay it off in time.
It is also important to be aware of any extra fees that are associated with the product that you sign up for as some have monthly account fees and even one-off establishment fees in some cases.
If you feel that you may not be disciplined enough to make the repayments in time it may be a good idea to look at taking out a personal loan through a financial institution instead. The interest rates for unsecured personal loans are generally much lower than those charged on the "buy now, pay later" plans.
Another alternative may be that you have a low-interest account that you can transfer the outstanding balance to at the end of the term, to avoid paying the inflated rates.
One of the other traps to be aware of is related to multiple purchases. Once you are issued with a store card it is at your disposal to purchase multiple items from various in-store promotions. This complicates the repayment process somewhat as it is not possible to direct your funds to a particular loan. This is a risky choice, particularly if you are not 100 percent confident in your ability to correctly calculate owed monies and associated costs, and could result in a lot of unnecessary extra fees and charges. Again, if you are looking to make multiple purchases it may be wise to explore the option of a personal loan.
The team of accountants at The Quinn Group are available to offer financial and accounting advice to individuals and business. If you have a query or would like more information please contact us on 1300 QUINNS or click here to submit an online enquiry form.
Related Tags: tax lawyer, family lawyers, business lawyers, tax lawyers, corporate lawyers, family law lawyers
The Quinn Group is an integrated, accounting, legal, and financial planning practice offering expert advice to help you achieve your business and personal goals. With more than 15 years' professional experience, we are committed to building long-lasting relationships with our clients by providing superior service in a timely and cost-effective manner. For more free advice please visit Corporate Lawyers. Your Article Search Directory : Find in Articles
Recent articles in this category:
- Guide To Finding The Right Irs Debt Help Solution For Your Situation
Finding the right IRS debt help for your situation is crucial. Where you turn for assistance will de - The Basic Function Of Accounting
Accounting is a profession as old as the hills. It was a well known practice in the Roman, Ancient E - The Fundamental Concepts Of Accounting
The Federal Election was held in Australia on 21st of August 2010. During the rather boring election - Higher Earners Warned Over Tax Relief
Those that fall into the higher earners bracket have been warned that the government may impose furt - Procter & Gamble Wins R&d Credit Case Against The Irs
On June 25, 2010, the U.S. District Court in Procter & Gamble Co. and Subsidiaries (P&G) v. United S - 3 Ways To Settle Irs Tax Debt For Less
You can settle IRS tax debt for less if you know your options. There are several ways that you can s - Five Steps To Finding The Best Tax Lead Company For Your Business
The lead buying business has become an efficient and proven form of outsourcing marketing efforts to - Truly Effective International Tax Advice
A big concern for the public and corporate business units is to deal with the international tax at t - How To Avoid Making The Common Tax And Bookkeeping Mistakes?
Even though who consider themselves in the financial loop may fall prey to some of the most common t - How To Appeal Your Property Tax Bill
The responsible homeowner will want to do a thorough check of their property tax bill to ensure they
Most viewed articles in this category:
- New Tax Rules for the Poor
New tax rules for 2007 will bring about a good year for the poorest of tax-filers in Maryland. Tax-f - The Best LEGAL Tax Shelter in the World-- Your Home-Based Business!
Welcome to the best legal tax shelter in the world-- you home-based business! As long as you keep go - Income Tax Questions Answered Because of Radio - The World Is a Client of "Better Business"
Having hosted a financial radio program over several years has exposed me to many questions. Some of - IRS Alert: Tax Payers Need to be on the Look out for Fraud
Tax-Definition.org (http://www.tax-definition.org) is reporting on the second part of the tax - 2007 Brings Tax Relief for N.Y. Residents
As of January 1, 2007, New York residents have been benefiting from a decrease in hospital bills, an - Figuring Out Your Tax Return Filing Status
When you are ready to plop down and start preparing that tax return, one of the first questions is y - Lost Last Year's Tax Return?
It happens every year. Just when you get motivated to get rolling on your taxes, you realize you can - IRS Is Focusing on Schedule C Filers
In the last few tax years IRS has been paying more attention to taxpayers who file a schedule C. The - Estate Taxes
Federal estate tax applies to the transfer of property at death. The estate of a person who died is - Deductions Missed In Taxes
The deductions which are often missed by tax payers are as follows: Old points on refinancing: The