Similar to a credit card, Zilch allows customers to defer part of a purchase to a later date. The difference is that with Zilch, the payment is deferred for a limited time period (namely 6 weeks) with an upfront payment made at the time of purchase. When making any purchase with Zilch via pay in 1 (debit) or pay in 4 (credit), we don’t charge any interest for borrowing.
With a credit card, a customer may defer the entire payment for an unlimited time and unless this is an interest-free promotion on purchases, they will then incur interest costs until full repayment is made. This places customers in a revolving credit model.
Products offered by Zilch are also typically cheaper than other comparable finance options, such as bank overdrafts and credit cards.
Bank of England data shows that the effective interest rate on interest-charging overdrafts is currently around 20%, while the cost of credit card borrowing is currently around 18%. UK Finance figures show that almost £55bn worth of UK credit card balances are outstanding as of January 2022, with more than half of these bearing interest.
Meanwhile, in the US, according to the Federal Reserve, US households held an estimated $856 billion in credit card debt in the last quarter of 2021, a $52 billion increase on the previous quarter. In 2020, US consumers paid $120 billion in credit card interest and fees.
By contrast, we do not charge interest fees on transactions and do not charge annual or monthly fees. In most cases, it is also free for a customer to use their credit balance to pay in 4 through the Zilch app or if they “tap and pay” with their Zilch card at any retailer.
In addition to this, we do not allow repayments via credit card or balance transfer, which risks compounding problem debt further.