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A number of online (mainly catalogue) retailers offer buy now, pay later credit accounts for shoppers, but these can come with some relatively steep interest charges. 

For example, Very.co.uk can charge customers as much as 39.7% interest, making it much more expensive than the average credit card (normally around 17%). 

Not that there's anything wrong with offering these accounts, but are customers being made aware of the terms and the potential interest charges when they make their first purchase? 

I've been looking at the checkout processes of three retailers which offer credit accounts to online shoppers. The key questions are: 

  • Do retailers make the interest rates clear before customers apply? 
  • Are customers aware that they will be credit checked? 
  • Are alternative payment methods offered for customers who don't want credit? 

Very.co.uk

Very is owned by Shop Direct Group, and was launched as a trendier version of Littlewoods back in 2009. We reviewed the relaunched Very website two years ago. 

Like many 'catalogue' retailers, it offers a credit account to customers, but I'm not sure that this is made as clear as it could be for online shoppers who may be unaware of this. 

The basket doesn't make the credit account clear either, only when you have entered your name, address and date of birth do you see this: 

It seems that Very would prefer you to open an account as the other (non-credit account) payment options are well below the fold.

The sheer amount of blank space between the big credit account 'continue' button and the card payment options below makes it look a deliberate attempt to put the card payment option out of view: 

On the next page, you do get some information about your credit account, but it isn't exactly easy to scan the information.

The 'important information' section with details on the credit account contains almost 2,000 words in a relatively small font size, and you need to do plenty of scrolling if you want to read it. 

Once my application (which I wasn't totally aware I was making by pressing continue) is successful, the actual interest rate is presented in a similar way to the 'important information' in the previous step:

Only by scrolling through more small font text can you find the actual interest rate, which is a very important factor in a decision to open a credit account. In this case, it was 39% APR. 

There are two problems here: 

  • The interest rates are not made as clear as they could be to customers. 
  • People are subjected to credit checks without being warned first - something which could damage people's credit ratings. 

Next

I was prompted to write this article after I accidentally opened a credit account with Next, when intending to pay by card. 

I'm aware that Next does offer credit accounts, and am probably guilty of missing some small print.

As the screenshot below shows, I am applying for a credit account by clicking confirm, but I blindly ignored all small print and clicked complete, thinking that all I was doing was registering and heading to the payment page. 

The problem here is that, though you can pay by credit or debit card, this option is only shown once you have completed your order, and been credit checked.

For people with less than perfect credit records, they would presumably be told that they have been turned down for an account before being offered the pay now option. Not the best way to get your customers to buy. 

Obviously, customer accounts work well for Next. A 'typical' 25% APR on purchases means that it makes more money from these customers, and it's a great retention tactic. People know they have a credit account with Next, so they can come back and make purchases without waiting for pay day. 

However, I wonder if Next's checkout process is deterring some customers who would rather not open a credit account by not making the alternative pay now option easy to reach. 

Freemans

For comparison, I tried out Freemans' checkout process, and this retailer seems to be much more upfront about its credit account and alternative pay now options. 

Once you get to the payment stage, the options are clear: 

You still have to select 'view more' to get some detail on the terms on the Flex Account, and it's in small print, but at least it's there: 

Conclusion

With some high interest rates on offer, and the prospect of a credit check, (which can potentially damage people's credit ratings if failed), then it's important that shoppers know what they are getting before they press the button to apply for credit account online. 

Though there is nothing illegal about it, and all the information about interest rates, charges etc is there somewhere, many retailers aren't making at this clear to customers. 

Let's face it, very few people bother to look at the terms and conditions on websites, let alone read them in detail. For example, has anything ever bothered to read Apple's 200 page T&Cs for the App Store on their mobiles? 

This means that customers can be entering into credit agreements without being fully armed with the facts, which could mean unhappy customers further down the line. It also means that shoppers could be paying unnecessarily high rates, when a credit card may be a better option. 

Graham Charlton

Published 9 September, 2011 by Graham Charlton

Graham Charlton is the former Editor-in-Chief at Econsultancy. Follow him on Twitter or connect via Linkedin or Google+

2565 more posts from this author

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Paul Rouke

Paul Rouke, Founder & CEO at PRWDSmall Business Multi-user

Great article Graham, you've made some extremely valid points. I'm always preaching to clients about the importance of transparency throughout the user experience that visitors have on their websites.

As I highlighed in this article I wrote on here earlier this year, ASOS do a superb job of providing visitors with one of the more transparency shopping baskets I've seen - http://bit.ly/ASOSbasket

Yes you could say with more transparency for the likes of interest rates some people will be put off who would otherwise have created an account, but one thing is for sure, new customers will know soon enought when they start getting their statements and see some pretty hefty intrest charges. So the question for businesses is do you want more potentially frustrated customers spreading the word about your business or a slightly smaller number of happy customers who are advocates of your brand?

Touching on your point around regarding people not reading terms & conditions, you're absolutely spot on - on many of of the test sessions we run for clients I gain insights from users about what they usually do when they are presented with terms & conditions, and to a man and woman no-one does consider reading them.

about 5 years ago

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Harry Kramer

What the hell are you doing shopping at 'Next'?

about 5 years ago

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Harry Kramer

Seriously, though, there is an issue here with financial inclusion. It's not so much that people will be put off by high interest rates, but more likely that many people have no choice but to put up with high interest rates (being unable, due to low income and relatively poor credit history to get a nice attractive credit card rate).

about 5 years ago

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Paul

I previously worked at Next. The account option is a massive revenue generator and whilst it is illegal to operate in the above manner (which they are aware of) they will continue to do so until told not to.

about 5 years ago

Arthur Moan

Arthur Moan, Country Manager / UK & Ireland at UserZoom Limited

Interesting article Graham and raising the subject of transparency is always going to be a popular discussion in the context of user experience.

Dr Harry Brignull articulates this very well - Dark Patterns: User Interfaces Designed to Trick People http://wiki.darkpatterns.org/Home

In defense of Shop Direct - you highlight the apparent lack of transparency within the Very checkout although your journey did not start in checkout? no doubt you started within the product details page where the 'Buy Now Pay Nothing for 12 months' is clearly labelled with a huge banner. The oversized call to action takes you to a specific and very clear definition of the proposition and interest rate - can't get better than this.

Good article all the same!

about 5 years ago

Graham Charlton

Graham Charlton, Editor in Chief at ClickZ Global

Hi Arthur,

I'm not saying the information isn't there, though i think the link on the product page could be missed if a) customers aren't really expecting to see it and b) focusing on the product details.

Much may well depend on familiarity with the brand. If you just come to a Very product page from Google, see the product you want and add it to the basket without being aware that Very is a catalogue / credit account retailer, then the checkout is misleading.

Very seems to go out of the way to get you to sign up for buy now pay later, to the extent that it 'hides' the other payment methods.

about 5 years ago

Seema Kumari

Seema Kumari, Head of Digital Marketing at Hearst Magazines

The Next example is shocking. I'm surprised they can get away with that? The Next credit card cancellation rate must be sky high!

about 5 years ago

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Online Clothing

Tricks like what next is doing is what is eroding customer trust in consumers who make their purchases online. I often wonder why is it so hard for the agency who oversees this to take some sort of action.

about 5 years ago

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Alwyn

The same happened to me, I inadvertently opened an account when I was trying to pay with my debit card using the next online shop. I complained to them about it, and received an apology... apparently nothing has changed though. I nearly got caught out by very tonight. Your/this articule saved me! Thank you for writing it, as I didnt see/find the pay by card option on the website is was so far down the page below the blank space - I was starting to think you had to have an account to buy something.

over 4 years ago

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