Interest charged on a BNPL credit agreement before the deadline to start repayments expires.

Johnj73

I recently got an account with studio.co.uk and i bought some things for Christmas. I had a credit of 500.00 available. Which i used to buy the various items, i was on the BNPL 6 months option.

This meant that i could buy using the credit allowance and not need to pay for six months but i paid the balance each month or two.

On there own website it says this,

Buy Now Pay Later

23-Jan-2019
Your personal account - Buy Now Pay LaterYour personal account - Buy Now Pay Later

What is Buy Now, Pay Later (BNPL)?

Buy Now, Pay Later is a credit option which allows you to order and receive your items now and pay for them several months later. Our BNPL plans typically last for 6, 9 or 12 months depending on the value of your order.

How does BNPL work?

When you get to the checkout, if a plan is available we will ask you if you want to start a BNPL plan. We will tell you how long the plan will run for and if there is a minimum order value. When you start a BNPL plan, you do not need to make a payment against it until the plan expires. When the plan ends we will charge interest and ask you to make a minimum payment against your balance.

What do I need to do?

You will receive a monthly statement showing your BNPL plan and any other balances you have on your account. If the BNPL plan is the only amount you owe, we will not ask you for a minimum payment until the plan expires. If you have other balances and are asked to pay a minimum payment, you must pay at least your minimum payment each month to keep your BNPL plan running.

What else do I need to know?

We recommend that you pay off your BNPL plan before it expires, if you do this you will not be charged interest. Step by step instructions on how to make payments against your plan are shown on your statement, or you can read more in Your Statement Explained. If you do not make at least your minimum payment, your plan may come to an end early and you will be charged interest immediately in addition to a late payment charge.

Interest charged and how to avoid it

When we calculate the minimum payment on your statement we do not include a BNPL order until the plan expires. If you choose to spread the cost further and do not pay off the BNPL plan before it expires, interest will be back dated to when the order was despatched. We recommend you make separate payments towards your BNPL plan before it ends. To avoid any interest, you need to keep an eye on, or make a note of the expiry date of the plan and make sure you pay it off before this date. To help you, we include important information such as the expiry date and the amount of the plan in the 'Your Plans' section towards the end of your statement

As you can see the last paragraph says that interest is not applied to the balance until the BNPL agreement comes to an end and that if you completely pay of all of the outstanding debit then you pay no interest. So that is why i did.

Then i decided to pay extra because there was a laptop i wanted to get and the credit allowance was not enough. So i was going to pay an extra 400 over two payments. I spoke to them via twitter DM and they agreed that they would order it for me and I’d just pay later but they were not very clear on the details. So i messaged them for clarification but long story short they changed there mind. So i asked for my credit to be refunded. 

But they said i had less credit than i had. I took note of all my orders and totalled the cost then totalled all of my payment and i was correct.

I asked them about this and they said that some of the credit had been used to pay the interest.

That’s when I checked the three statements that i have and saw that I was on the BNPL plan but also I saw a section on the statement that said estimated interest for next statement.

So finally here is my conundrum. Are they correct in saying that I must pay interest?

If you’ve got this far thank you but if you got this far and can help thank you ever so much. I just want advice about what to do.

Thank you all.

custardy

This is standard. The interest is calculated against your account total.
Otherwise with £1000 limit and you spend £1000 on BNPL,you could be 100's over that limit if you didnt pay within the interest free period.
So the intest isnt due till the end of the BNPL period but the interest total is keyed into your available credit until you clear the total.

sheramber

But they have charged the OP the interest amounts.

OP did you pay the BNPL plan amounts per the instructions on the statement?

PragmaticMoneySaver

Is the BNPL plan not solely for the purchases made at that time? AFAIK they aren't usually flexible plans that you can keep adding to.  So your initial purchases when you started the plan are interest free but your subsequent purchases are on your normal interest charging account.

Sandtree

You need them to explain the statement for you and their calcs.

If sounds like you have a £500 limit but wanted something for £900 so paid £400 in advance to put your account in credit and then ordered the £900 item expecting £400 to use the credit and £500 to use the BNPL.

I cannot say for Studio but the telesales company I first worked for was very similar in nature and pre-paying part of an item didn’t automatically mean that the item could then go onto the BNPL... in my day an agent would have simply said no but a senior agent/team leader could force it through the system.

Until you understand the statements theres not much advice that can be given.