HSBC launches new ‘buy now, pay later’ option for credit card customers
HSBC has introduced a new payment method that lets you spread the cost of a credit card purchase for longer without paying interest.
The Buy Now, Pay Later style installment plan will allow customers to repay purchases over £ 250 over three, six or twelve months.
Anyone with an HSBC credit card will be able to convert a purchase into an installment plan, with a monthly fee instead of interest.
A £ 250 purchase switched to an installment plan and paid off over three months will cost £ 1.67, for example.
The bank says converting to an installment plan could save money overall.
Usually, with a credit card, you pay no interest if you pay off the entire purchase within about a month.
Credit cards: a word of warning
WHY you have to be careful with credit.
With credit cards, you ALWAYS have to pay off your balance every month, unless you have a 0% interest rate offer and you spread the payments over several months.
If you don’t, you could pay up to 18% APR.
If you had a balance of £ 1,000 it would take you 18 years and three months to pay off the balance and you would pay an additional £ 1,204 in interest.
You should never borrow more than you can afford to repay.
But when you pay off a credit card over a longer period, interest is charged on the outstanding balance.
The repayment time and the amount of interest you pay will depend on the amount of the card, the interest rate on the card, and how much you pay back each month.
HSBC said repaying £ 1,500 through a 12-month installment plan could save £ 99.16, compared to paying interest on a credit card with an APR of 21.9% over the same period.
The monthly repayment in installments including a charge of £ 90 in total would be £ 130.63.
Paying off the same amount on a credit card would cost £ 138.95 per month, if payments were fixed, with interest of £ 166.66 throughout the year.
Card users can switch to installment payments through the HSBC app, if the options are available to them, and they will see the costs for each period before deciding which to choose.
Andrew Rankin, head of unsecured products at HSBC, said the new feature would help people budget better because the monthly payment is fixed.
With interest on a credit card, the monthly payment changes as you pay it and interest is calculated.
He said: “A customer may have bought furniture from different stores, and combining it into one payment plan can make it easier for them.
“Customers may also find it helpful to pay for a more expensive individual item, like a new laptop or phone.
“Dividing the cost into equal payments with a predetermined end date and minimal fees may be preferable to them and gives them more flexibility. “
Experts say the new feature gives consumers more options and is likely to be cheaper than an overdraft.
Rachel Springall, Financial Expert at Moneyfact, said: “It’s great to see an initiative to give borrowers better control over their spending and save them money on interest and mortgage charges. save some space on unforeseen expenses.
“The unexpected cost of appliances, electronics or repairing a car to make sure it is roadworthy could mean using a credit card to cover the cost, especially if someone has no spare savings, so being able to spread the cost may be a lot cheaper than going overdraft. “
But buyers should always shop around to see if there is a better borrowing option.
Ms Springall said: “It is important for clients to carefully assess the costs when borrowing, but it could provide some peace of mind to have a ‘buy now, pay later’ option to use when needed. . “
How does the new HSBC credit card installment plan work?
Existing HSBC credit card holders will be able to see the feature on the HSBC app, if available to them.
They will be able to convert a purchase into an installment plan, with a monthly fee instead of interest.
There’s no credit check because it’s not an additional loan – you’ve already paid off, it’s just a different way to pay it off.
Up to 10 separate purchases of at least £ 100 can be combined into a single plan, provided it adds up to at least £ 250.
Customers can have up to six installment plans at a time.
We’ve asked if there’s a limit on how much you can have on a plan, either individually or together, and we’ll update when we get a response.
You can choose how you want to pay your installments when setting up the installment plan.
If you miss a payment for two consecutive months, your installment plan will be canceled and the remaining debt will revert to your credit card.
You can also cancel the plan at any time and the same will happen. You will start paying interest again instead of fees in either case.
You can also pay off the prepayment plan, in whole or in part to pay it off faster and there is no penalty for doing so. If you pay it back faster, you can reduce the amount you pay in fees.
How to apply for a credit card
Here’s everything you need to know about applying for a credit card:
Which card do you need: The first thing you need to do is figure out what type of card you will need.
Lucky for you, you’ve come to the right place as this article will walk you through the type of card you need for your situation.
Check your credit score: Your credit score determines how reliable you are when it comes to borrowing.
The better your credit score, the more likely it is that banks will accept you for the best deals.
When you apply for a credit card, your bank will check your credit score to see if you match the offer they are offering.
If you have a bad credit rating, the bank may not want to lend you money in case you can’t pay it back.
You can find out how to check your credit score here
Don’t apply everywhere: If all you do is apply for lots of different offers, you might be hurting your chances of getting the best deals.
If you apply and your application is denied, it will leave a mark on your credit report, which means providers may be less likely to lend to you.
Always check using an eligibility such as MoneySuperMarket Smart Search to see how likely you are to be accepted for a credit card.
Don’t believe everything you see: Just because you see a credit card advertised for a great rate online doesn’t mean that’s the rate you’ll end up getting.
By law, credit card companies must give the rate they advertise to the 51% of people who successfully apply for a credit card.
But, depending on your credit score, you might get a different interest rate or a shorter period of 0%.
You do not have to accept the rate offered to you and you can always look for a better deal.
Fill out your application form: Once you have chosen the card you are looking for, simply complete the online form on the website of the credit card company.
Try to be as honest as possible with your credit information.
If your application is denied, it may be helpful to ask the bank for a copy of your credit report to see why you were not accepted for the credit card.
If you are accepted, it may take a week or two for your card to arrive.
If you have credit card debt and installment plan debt, remember that you will still need to make at least the minimum payment to the card.
We asked HSBC if purchases will still have Section 75 protection and will be updated when we get a response.
Section 75 means that if the retailer you are buying from goes bankrupt or your goods are not delivered or the items are faulty, you have the legal right to go to your card provider to get your money back if it costs over £ 100. .
How does HSBC’s credit card payment plan compare?
Buy Now, Pay Later Businesses like Klarna have exploded in recent years and give buyers the ability to buy something and pay later without interest.
Another option they offer is to split the costs and pay in installments, much like this new feature from HSBC.
With Klarna it’s interest free and there are no charges when you pay in three monthly installments.
Payments over a longer period of between three and 36 months may incur interest charges – the exact amount will depend on the amount and the period, but the representative APR is 18.9%.
Klarna and other BNPL providers are a payment option at the time of purchase.
With the new plans from HSBC, you pay with a credit card up front and can then switch to an installment later, and compare different repayment periods and associated costs.
Andrew Hagger, personal finance expert at Moneycomms.fr said: “It’s similar to BNPL, but the difference is you can use the HSBC offer on anything so you’re not limited to where you use it.
“It is a pity that there is no option for the customer to borrow for free – Paypal for example, currently allows customers to spread purchases over £ 99 over four months free of charge.
HSBC’s installment plan could still be cheaper than other options, though, as always, it’s worth shopping around to check first.
Mr Hagger said: “From the HSBC examples, it appears that customers who borrow larger amounts will save the most.
“It’s a little cheaper than standard credit card rates, but a lot cheaper than an agreed overdraft where most banks now charge almost 40% interest.”
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