How Does Zilch Work?
You’re probably familiar with the concept of Buy Now Pay Later (BNPL) but Zilch works in a slightly different way. We’re going to take a look at how does Zilch work and answer some of the other most frequently asked questions about this relatively new way to pay for goods.
What is Zilch?
Zilch is a Buy Now Pay Later (BNPL) provider that can be used to pay for items with retailers in the UK.
Zilch first launched in 2018 and is based in London in the United Kingdom. The Zilch app allows you to pay for goods in instalments rather than paying all in one go.
How does Zilch work?
When you use Zilch, you will need to select the store you want to shop in and you will then receive a virtual card from Zilch. You use this Zilch Mastercard to pay for items in four instalments over 6 weeks. You will need to make one upfront payment of 25% followed by three, equally spread payments of 25% each to cover the full cost of your purchases.
The Zilch app links to your bank account using open banking. This allows Zilch to check your affordability and let you know how much they are prepared to allow you to spend before you go shopping. Your Zilch card will be linked to your debit card attached to your bank account.
Using Zilch Online
Make sure your card is enabled for the retailer you want to use by searching for the retailer on the Zilch app. If you can’t find the store, you’ll need to tap on Zilch Anywhere (more about this later), Then choose how you want to pay (in 1 or in 4) and hit “go shop”. Your Zilch card details will automatically be copied and ready for you to enter at the checkout. Then just add your items to your online shopping basket as you usually would. Then checkout using the Zilch MasterCard. It’s that simple.
Using Zilch In-Store
When you’re ready to shop, make sure your card is enabled before you try to pay. Then, you just take the item to the checkout, then make sure the app is set to pay in 4 if you want to pay in instalments, and just tap your digital card on the card machine.
Two ways to pay
You can choose from two different ways to pay with your virtual Zilch card. You can choose which option to have as your default method, but you can go back into the app and change this at any time.
Pay in 1
If you want to pay in full, then just select “pay it all now” on the Zilch app. To me, this kind of defeats the object of having a Buy Now Pay Later account, but it does come with the benefit of earning Zilch Rewards which we’ll talk about further down the page.
Pay in 4
If you opt to spread out your payments, then you’ll want to choose to pay in 4. With this option, you will need to pay 25% of the total price straight away, so make sure you have this amount in the debit card linked to your Zilch virtual card. Here’s how the four payments will be spread out.
- 1st payment of 25% paid immediately and taken from the debit card linked to your Zilch account.
- 2nd payment of 25% paid two weeks after making your purchase
- 3rd payment of 25% paid three weeks after making your purchase
- 4th payment of 25% paid four weeks after making your purchase
Is Zilch safe?
Zilch is authorised and regulated by the Financial Conduct Authority (FCA) making it a safe way to spread payments.
What is my Zilch credit limit?
When you first register with Zilch, they will use your credit report to allocate you with a credit limit. You may get a small limit to begin with but if you keep your account in good order and never miss payments, then your limit may increase over time.
I’ve set up an account just to see how the whole thing works and got a £580 limit
Where can I use Zilch?
You can use your Zilch account to pay anywhere that accepts MasterCard. Here are just some of the retailers that accept Zilch:
- Adidas
- Amazon
- Apple
- ASOS
- Curry’s
- Dunelm
- eBay
- Just Eat
- Iceland
- Next
- Nike
- River Island
- The Body Shop
- Zara
So, once you’ve got the hang of how does Zilch work, you can use your account to pay at loads of different retailers.
Zilch Blocked Retailers
Zilch won’t allow you to shop with a few different retailers. These are retailers involved with gambling, virtual or foreign currency, alcohol, money transfer services, vouchers or weapons (including parts and accessories).
What is Zilch Boost?
Zilch Boost allows you to buy items above your available spend limit. It works by taking the extra amount that takes you over your payment limit on top of your first payment.
So, if you have an available limit of £200 and you use Boost to make a purchase of £300, your first payment would be £150 – 25% of £200 (£50) plus an extra payment of £100 to cover the difference between your limit and your purchase. So, in this example, your payments would be broken down as follows:
- Payment 1 – £150
- Payment 2 – £50
- Payment 3 – £50
- Payment 4 – £50
What is Zilch Anywhere?
If you can’t find the store you want on the Zilch app, then you can choose to use the Zilch Anywhere option. This will allow you to shop in stores that aren’t registered with Zilch. Note that you will be charged a £2.50 fee to do this and this fee will be taken at the same time as your first payment.
Zilch Rewards
If you use Zilch to pay in full for your purchases, you will receive up to 5% cashback.
If you use Zilch Anywhere or Tap and Pay in-store, you will receive 0.5% cashback.
You can use your rewards to pay towards future Zilch purchases.
How much does Zilch cost?
Zilch doesn’t cost you a penny, that’s where the name comes from. However, be aware that you will pay £2.50 if you use the Zilch Anywhere feature.
Pros and Cons of using Zilch
As with most things, there are pros and cons with using Zilch. If you’ve been wondering how does Zilch work and is it going to be the right thing for you, then hopefully these pros and cons will help you to make a decision.
Pros
- Buy Now Pay Later allows you to buy things you might not otherwise be able to afford.
- Zilch is interest-free making it a great way to spread the cost without paying any interest.
- No penalties if you want to make early payments.
- Zilch is widely accepted across the United Kingdom and can be used anywhere that MasterCard is accepted.
- No late payment fees.
- Zilch works with a virtual card that’s stored on your phone.
Cons
- You might be tempted to spend more than you can really afford.
- Zilch Anywhere incurs a fee of £2.50.
- You still need to make payments even if you’re waiting for a refund from the retailer.
Is it a good idea to use buy now pay later?
I’m always wary of BNPL as I worry that they encourage people to spend beyond their means. It can be so easy to spend the money and worry about making repayments later which can be a slippery slope into getting into trouble with debt and not being able to afford to pay your bills.
The issue with many BNPL companies is that they charge extortionate interest rates which can be difficult for people to pay. But, the main benefit of Zilch is that it’s interest-free with no late fees.
In an ideal world, you’ll either take the time to save up for large purchases or take on a side hustle in order to make the money to be able to afford it.
Zilch FAQ
Hopefully now you’ve got a good understanding of how does Zilch work. But if you’re still got things you’d like to know, here are some of the most frequently asked questions.
Does Zilch do a credit check?
When you first start to enter your details into the Zilch app, there is a notification telling you that they will do a soft credit check. This won’t leave a mark on your credit record, it just allows them to run a few basic checks on you so that they can make a decision about how much money they’ll allow you to spend.
Will Zilch affect my credit score?
The only time having a Zilch account might impact your credit score is if you have any late or missed payments. If you have outstanding payments that are 60 days late or more, your account may be passed to a debt resolution company. Late payments may then be reported to credit bureaus which can have a long-lasting impact on your credit score and make it difficult for you to be accepted for other financial products.
Is Zilch legit?
Yes, Zilch is legit.
Does Zilch have good reviews?
Zilch is currently rated as excellent on Trustpilot with 4.6 out of 5.
When do I make my first payment?
You make your first payment when you make your purchase.
What happens if I’m late making payment?
If you’re late making a payment, your Zilch available spend balance may be frozen and your account may be passed onto a debt resolution service. This can, in turn, negatively impact your credit score if it’s reported to a credit agency.
How does Zilch make money?
As Zilch doesn’t charge any fees, you might be wondering how they actually make any money. The main way they make money is by charging the retailer a small fee for every transaction.
How does Zilch work – final thoughts
Hopefully, this has given you an insight into how Zilch works. It’s very different to any other sort of credit options that other BNPL companies use, so it’s important to understand the ins and outs before signing up.
Only you can decide whether this kind of product is right for you. But, as with any large purchases where you plan to spread the cost, make sure that you can comfortably make the repayments.
