Catalogue shopping at home might be easy but do you understand the rules?
When money's tight, it can be tempting to take advantage of buy-now, pay-later deals. And catalogue companies have long provided cashstrapped customers with a way of spreading payments for clothes, household appliances and furniture.
However, National Debtline now receives around 100 calls a day from people struggling to repay catalogue debt - far more than the number of calls taken regarding payday loans or mortgage arrears.
Last year the charity received a record 25,235 calls about this type of debt - up by nearly 86% compared with 2007.
The Money Advice Trust, which runs the advice line, says problems largely arise because many shoppers don't realise they are taking out a consumer credit agreement when they start purchasing goods from a catalogue.
This means if they fall behind on their debts the catalogue company can pursue them through the courts. Neither are they aware that if they miss just one payment they will often lose any special 0% interest deals.
So Moneywise has put together a mini guide to catalogue shopping and what to do if you are struggling to pay for your debt.
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How does catalogue shopping work?
Catalogues such as Freemans, Littlewoods and the Next Directory offer a way of buying goods and spreading the cost over a set period, which can range from 20 weeks to four years.
They charge a typical APR of around 30%, although the rate you pay depends on your own personal circumstances such as your credit score, the size of your catalogue account balance and the time period you want to pay over.
Will I pay over the odds for my purchases?
Yes. While each provider has different charging policies, generally you pay interest for the convenience of not having to pay upfront.
For instance, on its website, the Freemans catalogue gives the example of buying a Hetty Vacuum Cleaner over two years at a monthly repayment of £7.57.
It states that over a 104-week term, you would pay a total credit price of £180.96, compared to a total cash price of £140.
That's an APR of just under 30%. The 'cash price' quoted also tends to be higher than what you can find elsewhere. For example, if you'd have bought the same vacuum cleaner direct from Tesco it would only have cost you £104.97.
I'm having trouble paying my catalogue bill. What action could I face?
Catalogue debts of more than £50 are regulated by the Consumer Credit Act 1974. The Act says that there must be a written credit agreement signed by both the borrower and the lender.
If you have signed an agreement, the company may pursue you to repay your debt and charge you additional interest.
It may also pass on your debt to third-party debt collection companies that may use bailiffs to take your possessions as part payment of what you owe.
You can also be taken to court and may face a county court judgment. However, if you did not sign an agreement, a court has the power to write off your debt should it find you have been treated unfairly by the catalogue company.
How can I clear my debt?
There are lots of claims management companies that promise to get your debts written off for you. However, steer clear of their help. "Most of these firms charge you large upfront fees, but with no guarantee that they will be successful in challenging your agreements," says National Debtline.
Instead, contact your catalogue company, explain your situation and offer to make small, regular repayments based on what you can afford. For more information, call National Debtline on 0808 808 4000.
What's the best alternative to catalogue shopping?
If you have a good credit rating, you could use a credit card that charges 0% on purchases for a set period - such as the Halifax All in One card, which won’t charge you interest for 15 months. These cards allow you to shop wherever you want, without having to pay the catalogue mark-up.
[Related link: The top 0% purchase credit cards]