Point-of-Sale Credit Bad for Consumer’s Pockets

Consumers could be overpaying for point-of-sale credit from big name retailers because they do not take the time to shop around for a personal loan, a leading building society has claimed.

Alliance and Leicester say that those who settle for "convenient" finance are in danger of wasting over £5,300 by signing up for credit deals with interest rates in excess of 15 per cent APR.

Around one third of shoppers say they regularly use point-of-sale credit to make expensive purchases such as a new kitchen or car. But almost four in ten said they signed up because they thought they were getting a competitively priced deal.

Alliance and Leicester claim that some double glazing companies have interest rates of around 20 per cent APR whilst kitchen retailers charge an average of 15.2 per cent APR.

A personal loan, on the other hand, can charge interest at around seven per cent.

Andy Bayes, Head of Personal Loans at Alliance & Leicester said that consumers should think carefully about how they pay for purchases before they spend money and leave themselves out of pocket.

"Retailer credit deals can be one of the most expensive ways to borrow money, so they should be treated with caution. I urge consumers to look at all the options when buying large as well as small purchases, and shop around for a better deal than retailer finance provides.

"Those who are already tied to a ‘point of sale’ finance deal should consider switching their debt. It is quick and simple to do and will rid people of their double-digit interest rate, and replace it with a much more affordable low-rate loan," he added.