Virgin Money has issued a Buy Now Pay Later credit card, which will undoubtedly shake up the Buy Now Pay Later sector. This market area has shown massive growth in recent years and is set to become one of the more prominent sources of finance for retail sales. So how does the Virgin Money Buy Now Pay Later credit card work, and how does the company make money?
Demand for the Virgin Money Buy Now Pay Later credit card
The company has whipped up a PR frenzy, and there is now a waiting list for the credit card. It is important to note that the Virgin Money credit card is not wholly Buy Now Pay Later; it is an option for transactions over £30. You are not obliged to use the Buy Now Pay Later element; there is no cost if you don’t use it, but it is there.
Those who decide to use this method can stagger payments over three, six, nine or 12 months. There are no charges for a three and six-month instalment plan, but anything longer will attract an instalment fee. The instalment fee will be 7.5% for a nine-month plan and 10% for a 12-month plan. Interestingly, there are no late payment fees.
Amalgamating existing payment plans
Once the card is fully functional, users will be able to amalgamate numerous Buy Now Pay Later offers. There will also be a range of checks and protection for the consumer and Virgin Money. In addition, you will be able to monitor the balance of your credit card, and future payments, via the app, which makes everything very simple and easy to understand.
Do we presume those who do not repay the outstanding amount before the end of the agreed period will incur some charges? While information is thin on the ground now, as this is a type of credit card, will any outstanding balance revert to a credit card type payment/interest plan?
Is this a sensible regulated option?
Interestingly, while the Buy Now Pay Later industry is waiting for the UK government to announce a new regulatory regime, Virgin Money claims its solution is already regulated. True, the company is regulated, and as this is a credit card type option, this must surely fall under current regulations. However, this means all customers and purchases will be credit checked, meaning some purchases could be rejected.
While the UK government is sure to bring in new regulations for Buy Now Pay Later activity, this is unlikely to come in until next year at the earliest. However, the industry is well aware of the concerns amongst consumers, and in many ways, the introduction of regulations will inject a degree of confidence.
Summary
This is just the latest in a long line of financial tools within or connected to the Buy Now Pay Later industry. While the sector itself is not new, the way it is delivered via an app makes it much easier to use. We are still awaiting details regarding the Virgin Money Buy Now Pay Later credit card (when, if ever, does an overdue payment revert to credit card interest rates?) which has put the sector back under the limelight.
