Weekly payment stores offer consumer goods like fridge freezers, sofas, computers, laptops, stereo systems, flat screen lcd led TV’s, ps3’s, carpets and other furniture. They collect payments for the goods weekly.
A weekly payment store is aimed at a certain demographic of people. Typically this includes people on a low income, minimum wage, social security benefits or working family’s tax credits. Also the target market is people who have some adverse credit history, who have been turned down for consumer credit elsewhere. So why would a company embark on a high overhead high admin type business collecting payments weekly? Well it’s to do with physiology and acceptance.
People who are poor and get paid weekly, maybe they do bar work or waitressing or a similar poorly paid service job, they cannot manage to make one large monthly payment. They can’t understands and get to grips with making one weekly payment. Also, a small amount of money sounds less to an unintelligent person even though they have to pay this amount over four times as often when compared with making a monthly payment.
Fact: Nearly 25% of people in the UK have some bad credit history.
Here is a typical example from the weekly payment store Brighthouse. It’s an Acer 15.6” laptop. The cash price/amount of credit is £579.64. It’s over 104 weeks (notice weeks and not months), and it costs £7.14 a week. £7.14 a week doesn’t sound a lot of money does it?
Well the real picture is that a laptop you could buy online from a shop like eBuyer for around £400 in total will cost you £1142.96 over the 2 years. They also like to sell insurance that costs another £1.65 a week too. So you can see how the weekly payment stores make money.
The representative APR says 29.9% which doesn’t look too bad, but with the money they make on the service cover, plus the item is say 15% or more over priced compared with an online retailer that just offers payment with a credit or debit card you can start to see real margins. Of course, they might sell bonds to raise capital, or have a line of credit with their bank at 9%-14% maybe, so some of the 29.9% goes on that.
Then there is a default rate so say if a laptop costs them £400, they collect say 10 weeks of payments at £10.99 a week which is £109.99 before the default, they sell on the debt which includes the interest on the entire term with is £632.57 at 14p in the £, so that’s £88.56. So they are faced with a £200 loss approximately. But those losses and costs are just built into the business model of selling overpriced goods with extras, at high rates of interest.
So, if you’ve got bad credit or you want to make weekly payments, Bright house is an option, all be it an expensive one.