Different types of consumer credit explained

Consumer credit is a type of personal finance product you can use to pay for goods and services.  It can be offered by banks, retailers and specialist finance companies, allowing you to split the cost of an item over multiple payments, rather than paying all in one go at the point of purchase.

 

What is consumer credit?

There are two main types of consumer credit – revolving credit and instalment credit.

 

Revolving credit

Revolving credit is the most common type of consumer credit. The best-known kind – and most popular – is credit cards, which can be used to pay for everyday products and services at the point of sale.

 

There are around 66 million credit cards in use in the UK. Credit cards are defined as ‘revolving credit’ because the amount you borrow and payback is flexible, as long as you stay within your pre-agreed limit and make your minimum monthly repayments on time.

 

If you pay off your full credit card balance each month, you won’t need to pay any interest on the money borrowed. However, if you fail to pay the full balance each month, the price of consumer credit can quickly start to snowball. This is probably the biggest downside of credit cards – the interest rates. In fact, average credit card interest rates exceeded 20% per year for the first time in July 2019.

 

Instalment credit

Instalment credit has boomed in popularity over the past decade, driven largely by the explosion in online shopping.

 

Instalment credit is used to pay for a specific product and is issued in a defined amount. The price of a product or basket of products is usually split into equal monthly instalments over a pre-defined period, say six or 12 months.

 

Traditionally, it has been used to pay for more expensive ‘big ticket’ products like furniture, home appliances and cars. However, customers are increasingly turning to instalment credit to pay for lower value everyday products and services. For consumers, the key advantage of instalment credit is that – unlike credit cards – it comes with low or no interest over a longer period.

 

DivideBuy’s interest free credit option, for example, is totally interest free. So shoppers benefit from the convenience of splitting the cost of a purchase, without having to pay additional interest charges on top.

 

In contrast with revolving credit, which is usually offered by big banks and specialist credit card firms, any retailer can provide instalment credit to its customers by partnering with a company like DivideBuy. Instead of looking to profit from the loan, retailers can use instalment credit as an extra incentive to increase sales and basket sizes.

 

What isn’t consumer credit

Although they may be used to pay for high-value products and services, personal loans are not usually thought of as being ‘consumer credit’ because the loan isn’t issued at the point of sale.

 

Similarly, a mortgage wouldn’t be classed as consumer credit because it is generally a longer-term investment and it is usually secured against a property, while consumer credit is generally unsecured.

 

DivideBuy’s interest-free instalment credit platform helps retailers encourage upsell, cross-sell and product bundling, resulting in an increase in average basket values. Best of all, retailer payments are guaranteed.

 

Customers can split the cost of their purchase over anything between 2 and 12 months. We’ve got no hidden fees or APR and offer a simple and easy integration with your ecommerce platform. Our expert installation team could have you up and running within days.

 

More and more customers are using instalment credit to make their purchases. Make sure your business doesn’t get left behind. To find out how DivideBuy can help your online business increase sales and basket values, book a demo today.

Get Started

Choose your date and time and we will contact you.

Recent News
How to boost your online sales with POS credit
The eCommerce landscape is booming. Reports show that at the height of the Covid-19 pandemic, 10 years’ growth in online sales took place in just 90 days. At a time when your customers are increasingly shopping online, eCommerce marketing has never mattered more – because as activity grows, so too does competition.   Broadly speaking, […]
16th February 2021
Switching made easy: Your most frequently asked questions
Do you want to switch POS finance providers, but you’re not sure about the process involved? Good news – switching credit providers is really very simple! In fact, at DivideBuy we do most of the work for you.   2020 brought with it a massive uptake in online shopping channels and so retailers are having […]
26th January 2021
Employee spotlight: The first point of contact for any DivideBuy partner, Retail Account Manager Abbie Blacklock
For many of our retail partners reading this, today’s spotlight really needs no introduction – our wonderful Retail Account Manager Abbie Blacklock. Abbie has been a crucial part in the journey for our retail partners, helping them out in anyway she can. Whether it’s answering enquiries, helping with training or assisting with setting up the […]
21st December 2020

Subscribe & Follow

Retailer
Newsletter

Sign up to receive news, hints and tips and helpful articles for your business.

Categories

Our use of cookies

We use necessary cookies to make our site work. We'd also like to set optional analytics cookies to help us improve it. We won't set optional cookies unless you enable them. Using this site will set a cookie on your device to remember your preferences.

For more detailed information about the cookies we use, see our Cookies page


Necessary cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.


Analytics cookies

We'd like to set Google Analytics cookies to help us to improve our website by collecting and reporting information on how you use it. The cookies collect information in a way that does not directly identify anyone. For more information on how these cookies work, please see our Cookies page .