Warning issued on short term credit deals ahead of Black Friday and Christmas shopping

Shoppers have been warned of the risks associated with credit deals such as buy now, pay later, and urged to be careful of the terms connected to such deals. 

A missed payment on the instalment deals can end up causing financial penalties while there can also be future credit implications for the buyer. 

There can also be set-up fees involved with the purchase. 

Buying on credit is when you purchase goods or services now and pay for them in full later or by instalments over a short period of time. Traditionally this was often referred to as “buying on tick” or the “never never”.

Examples of short-term credit services, which are now regulated by Central Bank of Ireland, include hire-purchase, personal contract plans, consumer hire, in-store credit and buy now, pay later.

It is common to see this type of payment offered when you are shopping online, or through ads in store, which offer you the option to pay in full or via instalments.

Buying goods and services on credit is the same as taking out a loan, the Central Bank outlines. 

If you are thinking about using short-term credit to buy a good or service, the Central Bank says it is important to consider whether this is right for your needs. For example: 

Before you choose to buy something using short-term credit, think about whether your budget will cover all the repayments throughout the repayment period.  

Buying things using short-term credit is the same as taking out a loan, even when no interest is charged. You will still have to repay the credit you have borrowed. You will also have to complete a credit assessment and agree a repayment plan with the credit provider. If you miss a repayment, it may affect your ability to borrow in the future.

When you buy using short-term credit, the credit provider will have to explain costs to you. Short-term credit agreements can include additional fees and charges. For example, if you miss a payment, you will have to pay late payment fees, which could significantly increase your instalment cost and total cost of credit. Set-up or administration fees are also common.

It is important that you understand the fees that you could be charged, as this could significantly increase the price you will pay for goods and services. It could also have longer-term implications for your ability to borrow in the future.

If the loan is for €500 or more, the credit provider must submit this information to the Central Credit Register.