10 sneaky retail tricks that are debt traps - part 1

by StepChange Debt Charity on 19 April 2011  |  15 comments
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Don't get caught out the next time you're making a big purchase.

Retail stores are being hit hard in the current economic climate, and that makes them all the more determined to squeeze as much as they can out of customers looking to make a purchase.

In this two-part blog post we’re going to look at the top ten retail tricks that can often leave you with a debt hangover, especially if you’re looking at ‘big ticket’ items.

So in reverse order, here are the first five…

10. Payment plans

These usually require a 10% deposit and the usual credit check. They’re mostly offered on items over £300 and really they’re just high-interest unsecured loans. The salesperson may purr about spreading the cost and making the amount affordable, but if you want a loan it’s best to shop around first, starting with your bank.

There is nothing wrong with affordable credit, but high-interest loans taken on the spur of the moment often lead to trouble further down the line.

9. “Sold With”

An old retail trick that has been updated for modern times; my grandad told me about seeing a camera advertised at a local shop many years ago that seemed incredibly cheap. He went in with his white fiver burning a hole in his pocket and by the time he had bought all the extras the camera required, he realised that it wasn’t as cheap as he’d imagined.

Fast forward 50 years and you’re about to buy your new plasma TV when the salesperson informs you that the TV won’t work unless you spend £100 on brand new cables.

To avoid getting caught out, shop around and arm yourself with a bit of knowledge before entering the arena. Many big chain retailers offer some big ticket items such as TVs as ‘loss leaders’. They’re selling the TV at a price so cheap that they’re making a loss on it.

They do this because they trust the sales floor staff to make a killing on the extra bits you need to get the TV working, be it Blu-ray players, stands, surround sound systems and worst of all, or cabling.

Researching your purchase can mean the difference between staying within your budget or ending up with a black hole in your finances.

8. The new 'new thing'

Electronics companies, car manufacturers and just about every other product maker and supplier does this. It’s the new thing, the new colour or the new and improved version.

Of course there are always improvements in technology, and advances in fashion and taste. But before you rush out and purchase the very latest thing, you have to ask yourself how much value are you going to get from it. And more importantly how much will the price have dropped if you look at the market again in a couple of years’ time.

We all love the latest gadgets but the cost of these new items often drops considerably if you apply a little patience. Waiting a few months could mean you’ll be a lot better off.

7. Double teams and the secret of the third ‘no’

It’s less common now that salespeople work for commission; usually they work for a store bonus. What this means is that as long as the store reaches certain key performance indicators then all the staff will receive the bonus.

This leads to a real team work ethic within the store, but it also means that many of the salespeople will hunt in packs and help out some of the weaker junior sales staff.

So picture the scene: you’re out to purchase a nice new PC, you don’t want credit when asked and you also don’t want the inflated extended warranty even though you’re told it offers three years’ worth of ‘piece of mind’. The salesperson tries meekly to push the offer of the warranty again and for the second time you say a firm “No”.

The salesperson takes you to the checkout. While you’re waiting for a free till, a more senior salesperson sees you waiting and grabs an open checkout to speed your way through the tills. The senior salesperson compliments you on your product and makes a few witty remarks. You’re pleased that he’s speeding up the shopping experience. You don’t realise that this is all planned.

The senior sales person is about to scan your new PC when he wonders why you haven’t taken the extended warranty. He then forcefully begins a complicated and well-honed spiel about the quality of the warranty. He’s much better at selling the guarantee that the junior salesperson and having said no twice you begin to consider the warranty again. And you buy it.

It’s called “the third no” and not many people can say it, particularly when their guard is down and they are at the checkout just about to take out their credit card. Retailers know all about this, and they’re very good at it - it’s the best way to make you spend more than you budgeted for.

Being firm with pushy sales staff might make you feel uncomfortable, but it’s better to resist sales patter and at all times stick to your budget. Your bank balance will thank you.

6. Extended warranty

The salespeople spend all the time in the world directing you to the best and most reliable product. Then they tell you that it only has a 12-month manufacturers warranty and that you should think about extending the guarantee with them and that this includes accidental damage.

Anyone who has ever tried to claim on these policies might tell a different story. And as much as this practice is a well known money-maker for the company and not a good product for the customer, these companies wouldn’t keep selling them if people didn’t buy them.

However, you’d be better off simply putting some money aside in a savings account each month for emergencies.

Guarantees for items such as plasma TVs are often up to half the price of the original purchase - it would almost make sense to buy two TVs and keep one boxed in the garage in case the other one breaks!

Keep calm, don’t be swayed and at all times stick to your budget when in the shop. Salespeople will often offer to put the guarantee on credit in order for you to have ‘peace of mind’ and ‘affordable payments’ – beware!

We all like to go shopping. At CCCS we do too. The important thing is to stick to spending amounts that you can afford and that you have accurately budgeted for.

Then next time you’re shopping for a big ticket retail item you might want to take this list with you, along with a written amount of how much you are willing to spend.

Hopefully by following our advice you can keep clear of retail debt traps but if you’re struggling with credit debts already, take some free and impartial advice from CCCS by using our online debt help.

Keep a look out for part two of this blog post next Thursday (28 April) on lovemoney.com.