Your pay weekly store questions answered

If you struggle to pay for expensive household items or white goods, you might be tempted to use a pay weekly store to help manage the cost.

These stores position themselves as an affordable way to pay for items such as a washing machine or new TV. However,  the reality is that they are not as affordable as they might appear at first glance.

Thanks to their low weekly payment options, products from a weekly payment store might seem more attainable. However, spreading your payments in this way means you'll actually end up paying much, much more in the long run.

Payments are typically spread over two to three years and interest is charged on top - usually at a very high rate.

For example, let’s say a washing machine is priced at £1,015.99. If you pay a £12.50 weekly payment at 64.7% interest, the item will end up costing you £1,950 over 3 years - nearly double the price!

How do weekly payment stores work?

Pay weekly and pay monthly stores divvy up the price tag of expensive furniture, appliances or technology into a much lower payment. In return, a significant sum of interest is charged on top. 

This means that by the time you’ve met the last payment,  the total amount paid can double the cost of your item.

You can usually make payments by phone, online or in store if you use a company such as PerfectHome, while Buy As You View collects payments using a smart meter.

Why are pay weekly stores bad news?

However cheap the weekly charge looks on its own, it’s crucial that you compare the total cost before you agree to anything. This is due to the following reasons:

• Inflated initial price... Even before stores add interest, their basic prices are expensive. This means if you buy an item outright halfway through your agreement (to avoid further interest) you'll still pay a hefty mark-up.

• High interest rate... Pay weekly stores will typically charge anything between 30% and 70% APR, but remember you're paying interest on the original inflated price too. This will bump up the total amount you pay.

• Non-ownership... You're renting rather than buying so you don't actually own the item until you've made a final "purchase" payment. Added to that, agreements typically last for 2-3 years during which you're financially responsible for damage. You may be required to take out separate insurance to cover your purchase which will add to the overall cost.

How to pay less

Rent to own has traditionally proved popular due to the fact there is often no deposit to pay and you don’t necessarily need a top-notch credit score.  

However, most stores now run the same credit checks as credit card and store credit applications and will check whether you can afford to keep up with your repayments. This means there’s no real advantage to using a pay weekly store and you’re better off shopping around and comparing your options.

Alternatives to pay weekly

Here we look at alternative ways of purchasing the same washing machine and compare the costs to the £1,950 it would cost you at a pay weekly store.

Credit card for bad credit

If you buy a washing machine using a credit building card, you'll own it outright and thereby benefit from Section 75 cover. This protects any credit card purchases costing between £100 and £30,000 in the event they are faulty, don't show up or the retailer goes bust. 

While interest rates are high on credit building cards, typically around 35% APR, that's still significantly lower than many pay weekly stores. And don’t forget, because you’re not buying the washing machine from a pay weekly store, you can shop around for a cheaper deal.

• For example, if you bought the same washing machine on the high street for £850 outright, on a credit card charging 34.9%, you'd clear the balance in 22 months by paying off £12.50 a week (or £52 a month). You'd pay a total of £261 in interest and save more than £800 overall. Compare credit cards for poor credit...

0% purchases credit card

If you buy the £850 washing machine using a 0% purchases card, you won't pay any interest for the 0% introductory window . That means you're paying down the purchase price only, and by the time the 0% deal ends the balance you do pay interest on will be much lower.

• A mid-range card might give you 12 months' 0% interest, then charge around 18.9% APR. If you buy the £850 machine outright and pay £12.50 a week you'd pay off £650 in the first year, interest-free. You'd pay the last £200 off within 4 months, with £8 interest, saving over £1,000 compared to pay weekly stores! Compare 0% purchase cards...

Buy now pay later catalogues

Some stores such as Littlewoods and Argos, etc, offer store credit which lets you buy items today and pay later or by instalment. Their overall cost is comparable to a credit card for poor credit, but still much cheaper than a pay weekly agreement.

You might also be able to use a third-party buy now pay later provider such as Klarna, Clearpay or LayBuy. This can reduce the interest you pay to 0%, but don’t tend to spread the payment over much longer than a couple of months and restrict the amount you can spend to a few hundred pounds.

The deals are done between the buy now, pay later provider in the store, so check options at the checkout to see if one is available.

• Terms vary, but store credit can be interest-free for a set time, or  offer a flat rate APR, usually around 30-35%. You could save nearly £800 against a weekly payment store charging 64% interest.

Your weekly payment rights

If you do decide to buy from a weekly payment store, it's vital that you know your rights. Retailers are regulated by the Financial Conduct Authority (FCA) which means you have clear channels to complain if you feel you've been treated unfairly - including the Financial Ombudsman Service.

You can also check if companies have signed up voluntarily to the Codes of Practice published by industry bodies such as the Finance & Leasing Association, Consumer Credit Trade Association or Credit Services Association. You're protected by legislation including the Supply of Goods (Implied Terms) Act 1973 and Consumer Credit Act 1974. 

If you’ve tried to get a refund on a faulty item and it's been unsuccessful, or you’re not happy with the service you’ve received, you can complain directly to the company. 

The company will hopefully look to resolve the complaint promptly. But if that’s not the case, you can contact the Ombudsman Services for support.

Repossessions and cancellation

When you buy from weekly payment stores, you can choose to complete the purchase or cancel your payments at any stage. Check over the terms of your agreement before you cancel, and know your rights:

• If you've paid over 1/2 of the total amount due, you can cancel and return the goods without penalty

• If you've paid less 1/2 you can still cancel but you may be liable for a penalty fee

• If you've paid over 1/3 of your agreement total, the retailer must get a court order before they can repossess

• Retailers cannot forcibly enter your home to repossess goods without a court order: just say no

• Even with a court order they cannot legally repossess items unless they have issued you with a default notice and given you at least 7 days to put things right

• Weekly payment stores cannot pressure you into paying in full, in unreasonably large instalments, or increase payments to a level you can't afford

• Punitive penalty charges for late payment and cancellation are illegal - losses for breach of contract must only reflect the actual loss

If you fall behind on your payments or are struggling financially, seek free debt advice from charities such as Citizens Advice, Money Helper and StepChange.