Are you considering signing up with a credit catalogue? In this post, we are going to tell the 5 things you should know about getting a credit catalogue, but first, let’s look at some basics.
What is a Credit Catalogue?
A credit catalogue is an online store that offers customers goods on credit. The shoppers do not have to pay for the goods at checkout; they can take their items and pay later. Customers are offered a variety of payment options, and they get to choose how to pay for the goods. Buying products this way is called getting a credit catalogue. It is also often referred to as having a mail order account or a simply a shopping account.
How do Credit Catalogues Work?
Anyone intending to use a credit catalogue must be an adult, have a valid bank account, a permanent address history, and a regular source of income. Signing up with a credit catalogue involves filling and submitting an online application form. The signing up procedure is simple, and shoppers typically get feedback within a few minutes.
The catalogue reviews the application, and upon approval, the shopper must create a personal account. It is through this account that the shopper manages purchases and payments. The account cannot be transferred to any other person because its financial obligations are vested in the individual that registered the account. Most credit catalogues allow just one account per shopper. However, you can shop from different affiliates (if any) of the credit catalogue using the same account.
Once the shopper creates an account, most credit catalogues grant them credit immediately. However, catalogues limit customer’s shopping by allowing purchases up to a certain amount. The user’s credit rating is among the major factors considered when setting the shopping limit a catalogue approves a shopper for. In most cases, however, the limit does not go beyond £500, but if the user pays regularly and promptly, this limit gradually increases.
Now here are the 5 things you should know about getting a credit catalogue;
1. Credit catalogues’ interest rates vary widely
The interest rates credit catalogues use vary widely. The lowest in the market is around 18% while the highest is about 60% per annum. It can go higher than this, though. However, the higher interest rates are often used by credit catalogues with long-term payment periods (usually more than 24 months). They are also used by some no credit check catalogues and bad credit catalogues. The average interest rate is about 40%.
Note that most credit catalogues offer customers interest-free periods which often last between 3 months and 12 months. During the interest-free period, a customer’s monthly instalments do not include any interest. This, therefore, means that of the customer pays off the amount owed within the grace period, the entire cost is equal to the cost they would have paid had they bought the items the regular way, without credit.
However, if they are unable to complete payment within the interest-free period, then their monthly instalments after the grace period elapses will include interest. So it turns out that you can avoid extra costs by clearing your debt before the interest-free period elapses.
2. They give you various payment options
As noted earlier, credit catalogues give customers a range of payment options to choose from. You are still allowed to pay the full item costs at checkout, but you can select the payment option that you will work best for you from those provided. For instance, you can decide to spread the cost over several months or several weeks so that you pay in small monthly instalments.
Better still, you may select the Buy Now Pay Later option which will allow you to take the goods and pay for them at a later date. Some credit catalogues allow their customers to delay payment for over a year. However, remember choosing long payment periods will mean more extra costs as longer-term credit attracts high interest rates.
3. Missing a payment or paying late hurts your credit rating
A catalogue credit is just like a bank loan in the sense that missed or delayed payments hurt the shopper’s credit rating the same way missed loan repayment does. Again, if the customer defaults entirely, the credit catalogue can sell the debt to a third party like a collecting agency, and you may be sued for defaulting.
It is, therefore, advisable that you choose the payment options that you are comfortable with. Many customers like spreading their costs over several months so that they pay small instalments every month. This way, they can afford to buy even the more expensive items on offer.
4. Credit catalogues can help you rebuild your credit rating
If you have had various delinquencies that brought your credit score down significantly, signing up with a catalogue with credit can help you bring it up. How is this possible? When a credit catalogue offers you goods and allows you to pay for them in, for instance, monthly instalments, it is giving you a chance to prove that you are capable of taking financial responsibility by paying your bills regularly.
If you don’t miss payments or pay late, your credit score will improve gradually, and you will build trust. You will not only get more shopping opportunities, but in the long, your chances of being accepted by other lenders will also increase.
5. Credit catalogues come with various pros and cons
Getting a credit catalogue comes with several positives and negatives. Here are a few of them;
– They have a wide range of products
– Most guarantee approval, so you won’t get turned down even if you have a poor credit rating
– You can spread costs. This makes it possible to get expensive items
– A poor credit rating doesn’t deny you credit
– They offer incentives like coupons and discounts, as well as, free deliveries
– Using them can help you rebuild your credit score
– Delayed or missed payments hurt your credit rating
– Some, like bad credit catalogues and no credit check catalogues, have high interest rates
– You can be tempted into purchasing too much, making payment difficult
If you’re looking to start shopping with a credit catalogue, hopefully, the five factors explained above will help you make an informed decision.