Got a pension question? Our help is impartial and free to use. Get in touch online or over the phone on 0800 011 3797

In-store credit and hire-purchase

There are many different types of in-store finance, all offering you the option to buy something now and pay for it at a later date. Make sure you know what you’re getting into before you use in-store finance.

What are store cards?

Store cards are a form of credit that you can only use to pay for goods in a particular store or group of stores.

You’re likely to be offered a card at the checkout when you come to pay for the goods.

The interest rates on store cards are often much higher than normal credit cards.

This means unless you pay off the balance in full each month it can take a long time, and cost a lot more, to repay the debt – particularly if you continue to use the card.

Before you sign up, make sure you can afford the repayments.

If you sign up but change your mind, there's a 14 day cooling-off period within which you can cancel the agreement. 

Some store cards might actually be ‘charge cards’ – which means you have to pay off the full balance of what you’ve paid for at the end of each month.

If you don’t, you’ll get extra charges. It's important you understand what you’re signing up for.

arrow icon

What are store-linked credit cards?

Store-linked cards are credit cards that carry the branding of the store you got the card from. They might come with benefits and discounts available when you use your card to pay for items sold by the company who supplied you with the card, but, unlike store cards, they can be used outside of the store as well.

Store-linked credit cards might have longer interest-free periods than store cards, and similar rates of interest to unbranded credit cards. But you still need to think how you’re going to pay them off – make sure you do this before any introductory period ends.

arrow icon

Catalogue credit and shopping accounts

Many catalogue brands, online shops and some high street shops offer buy now, pay later credit.

You get finance on an individual purchase and pay it off over time.

One type of this credit, offered by catalogue brands, is a ‘shopping account’.

This is a bit like a credit card, but without the card. You’re given a credit limit, and you can keep spending up to this maximum amount, provided you make at least the minimum repayment each month.

In other cases, you might be offered what’s called ‘instalment credit’. This is basically a loan to finance the purchase. You own the goods from the start, but you pay for them in fixed instalments, either monthly or weekly, over a fixed period.

arrow icon
arrow icon

Hire-purchase

A hire-purchase (HP) agreement is often offered when you buy a car or furniture.

Unlike instalment credit, you don’t own the goods until you’ve made the final payment. This means that, in effect, you’re hiring the goods with an option to buy them.

When you’ve made all the payments to the finance company, you can opt to buy the goods by paying a final ‘option to purchase’ fee.

This might be a small nominal amount or something much larger. These larger payments are often known as ‘balloon’ payments.

‘Conditional sale’ agreements work in a similar way – ownership is conditional on making all the payments. If you don’t make the payments, the company can take the goods back.

In both cases, you can’t sell the goods until the agreement has come to an end. And if you don’t keep up your repayments the goods can be repossessed.

However, if you’ve paid at least a third of the total amount payable, the company can’t seize the goods without getting a court order first.

Your rights

Generally, anyone offering credit needs to be authorised by the Financial Conduct Authority (FCA), so you have important rights should anything go wrong.

Typical complaints include:

  • You’re unhappy with the quality of goods you’ve received.
  • You’re unhappy with the valuation of the goods at the end of the period.

If you want to complain, your first step should be to contact the firm or store where you bought the goods.

If you don’t get a satisfactory response within eight weeks, you can complain to the Financial Ombudsman Service.

How to cancel a hire-purchase deal

You can choose to end a hire-purchase deal at any time before making the final payment. This is providing you’ve paid at least half the total amount payable, or pay up to that amount and there’s no damage to the item above normal wear and tear.

This is called ‘voluntary termination’ – you hand back the goods and walk away with no further liability.

This is different to voluntary surrender, where you return the item but still owe what’s left. The finance company will usually sell at auction and charge you for the difference.

Or you can settle early by paying what you owe minus a rebate (called early repayment) and take ownership of the goods. You might still have to pay one to two months interest (sometimes called a settlement fee).

In either case, you must inform the company in writing – details of how to do this should be in your credit agreement.

Keep a copy of your letter of termination in case any issues come up later on.

arrow icon

One benefit of in-store finance

One positive feature of in-store finance, in contrast to store cards, is that they will tend to offer some form of interest-free period. This will usually be between three and 12 months.

But this is only positive if you're able to pay off what you owe in full within the interest-free period.

What to watch out for

If you don’t pay off the balance by the end of the interest-free period, your debt can rapidly mount up.

The effect on your credit rating

Having too many credit agreements (including in-store finances or hire-purchase) can lower your credit rating, even if you’re making your repayments on time.

That’s because lenders might look at the total credit you have available to you and the total amount you have to repay when they’re deciding whether to lend.

If you miss any repayments, this will damage your credit rating.

Insurance add-ons

The store might attempt to sell you extra products, such as:

  • stain protection insurance, on items such as a sofa or a carpet
  • warranty insurance, to protect you against the cost of some repairs.

These extras tend to be expensive, and might be unnecessary – as you could be covered by other insurance.

You need to check the terms and conditions too, as there are usually conditions and exclusions. It might not be worth your while to pay extra.

Alternatives to in-store finance

The best alternative to in-store finance, unless it’s 0% finance, is to buy the goods with money you already have. In some cases, you might be able to negotiate a discount for cash.

If the goods are something you really want and 0% finance isn’t available, could you save up for them?

If you really must have them immediately, research your options. It might be better for you to take out an interest-free credit card or a personal loan.

arrow icon
Was this information useful?
Thank you for your feedback.
We’re always trying to improve our website and services, and your feedback helps us understand how we’re doing.
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Looking for us? Now, we’re MoneyHelper

MoneyHelper is the new, easy way to get clear, free, impartial help for all your money and pension choices. Whatever your circumstances or plans, move forward with MoneyHelper.

Continue to website
Talk to us live for…
Talk to us live for…
Talk to us live for pensions guidance using
Talk to us live for money guidance using…
Hours
  • Mon – Fri:9.00am – 5.00pm
  • Sat, Sun and bank holidays:Closed

* Calls are free. We’re committed to providing you with a quality service, so calls may be recorded or monitored for training purposes and to help us develop our services.

Talk to us live for money guidance using the telephone
Hours
  • Mon – Fri:8.00am – 6.00pm
  • Sat, Sun and bank holidays:Closed

* Calls are free. We’re committed to providing you with a quality service, so calls may be recorded or monitored for training purposes and to help us develop our services.

Talk to us live for pensions guidance using web chat
Hours
  • Mon – Fri:9.00am – 6.00pm
  • Sat, Sun and bank holidays:Closed
Talk to us live for money guidance using webchat
Hours
  • Mon – Fri:8.00am – 6.00pm
  • Sat:8.00am – 3.00pm
  • Sun and bank holidays:Closed
Talk to us for pensions guidance using our web form

We aim to respond within 5 working days

Talk to us for money guidance using our web form

We aim to respond within 2 working days

Talk to us live for money guidance using WhatsApp

Download app: WhatsApp

For help sorting out your debts or credit questions. For everything else please contact us via Webchat or telephone.