Pay monthly and also known as Buy now pay later is a great new payment method offered by many popular online stores. It essentially helps to stretch our wallet, or ‘buying power’ so that we can make larger purchases that we normally wouldn’t be able to make in one session, empowering us to buy what we want. Perhaps a new batch of clothes for a holiday or a fancy new dishwasher after the old one broke down. It was pretty old, about time really if you ask us.
Now, the reason that everybody doesn’t do that all the time is that the catalogues charge us a little more than if we’d just paid up front the whole sum. They do this because sometimes this can be an inconvenience to them as they can’t absolutely know that we’ll make every single payment, but be aware, if we do miss one, then our credit score can take a hit, and nobody wants that.
Most of these payment methods work on a monthly basis, or more specifically, a 28 day at a time program. This is because a lot of people are paid standard salaries on the same time period, both being every 28 days, so the two fit together nicely and let us chip away at the bill until we’ve finished payment without running out of money.
When you first start, you’ll probably find that the site sets you something called a ‘minimum payment’.
What this means is that no matter what, you need to give them a certain percentage of what you owe per month, but it’s not hard to make, as they try to make this process as easy as possible.
This is to stop us stretching the payments out too long and is usually 1/12 of the price of the total of whatever you bought, meaning that if you pay even just the absolute minimum every 28 days, it will be all done within a year.
That’s not to say that just giving the least you can possibly give is the most beneficial to our wallets… The way that the companies actually make their share or the money from this is by charging you an extra percentage of the cash you owe them every time you make a payment.
So, essentially, the least amount of payments that you make, the better off you will be in the long run. Let’s give an example.
Steven buys a tiger stripe faux leather armchair for £120. It’s really, ugly, but he doesn’t know that and it doesn’t really matter to him anyway.
But still, come on Steven, tiger stripe? Really?
He chooses to buy now, pay later and his payments are split into 12 sets of £12 to be paid every 28 days.
Okay, so the interest (what they charge on top) is 20% per year. They say per-annum but it’s the same thing. They just like over complicating things sometimes.
The company talks to his bank and they set up a direct payment to be taken from Steven’s bank account and handed to the company every 28 days for a year, where the chair will be completely paid for by the end of the course or 12 payments and he will no longer owe anyone anything. Good job Steven!
Now all Steven has to do is lay back on his ugly armchair and make sure there’s enough money in the bank to be able to pay the armchair company what he owes them plus a little more from the interest.
It’s worth taking note that the interest from a lot of these websites can be a little steep, with the average being about 34-5% APR (annual percentage rate) for people with low credit scores. They say that this is because they cannot be sure that every payment can be made on time, so charge a higher rate to smooth over the losses they make when someone can’t pay.
The good thing is that if you DO make all the payments, your credit score will rise and you’ll get access to sites which charge less APR. Please bear in mind that if you do have a bad credit rating, some major online credit catalogues such as Littlewoods and Very may refuse you access to this scheme and you will have to go somewhere else instead. No credit check catalogues do not really exist, but no matter, it’s their loss if they don’t get your money if you think about it. You’ll soon have good credit again. Unless you never had bad credit, in that case, well done!
So if you want our recommendation, pay the bills as early as you can. Not only will it look good when other companies see it, it’ll help get a load off your chest, that load being interest. Nobody likes you interest, go home.
You see, it’s always best to pay as much as you can, as fast as you can. This helps to prevent the evil armchair companies draining your account. Well, it’s not that bad, but it can seem that when you’re on a tight budget. Don’t tell them we said that, it’s just between us.
So let’s go through this once more:
• Buy the things you want to buy from a site, say shirts, appliances, Christmas gifts
• Select ‘buy now pay later’ when choosing payment options in the checkout
• Choose the plan that you’d like to follow if the chance arises
• You will be billed at the end of the month with a statement from them
• From then on, you just pay every time you need to*
*at the minimum, but make sure to pay more if you can to save money in the long run.
If you check around this site a little, you’ll find that the whole place is pretty much based around giving you enough options to choose from when using credit, so that you can feel empowered both as a guest on our site and as an online shopper.
Buy now pay later is an excellent option for those who are a little strapped for cash when they buy the things they need and it is your right to have access to the knowledge that will allow you to make an intelligent decision when shopping online.
Happy shopping.