Buy now...can't pay later

Buy now...can't pay later

2020 has seen a surge on Buy Now Pay Later  (BNPL) apps and these are set to grow even further in 2021. With lockdown, online shopping has grown exponentially and so have the variety of payment options for the consumer.

Although the mechanics are not new, they’ve long been used as catalogue payment method such as Littlewoods or Very, the likes of Klarna, Clearpay and Laybuy have brought this to everyday online purchases.

Everyone is a winner (but is that so?)

  • Merchants / commerce sites have seen an increase in order value
  • BNPL business charge a % of the sale so they make good money and keep the payment interest free
  • Users can buy a product and spread the cost

Seems like a no-brainer. However, BNPL companies have made it too easy for people to get carried away and buy products that they can’t afford now.

There are increasing worries from debt charities about these products adding pressure to Britain's multi-billion pound debt pile, UK financial regulators have no plans to investigate them. With lockdown, people on furlough, redundancies and Christmas looming, some might resort to this and could regret it later.

While this form of credit is preferable to credit cards or store cards and their high interest rates, consumers can still find their credit score being impacted if they miss a repayment or delay in paying or their case being referred to a debt agency if unpaid for several months (as pointed by Martin Lewis below). Interest may also be payable if the balance is not repaid in full during the interest free period.

So THINK before you buy, overall, we would say to people that if you can't afford the product today - why do you think you could afford it in 30, 60 or 90 days time?"

Top tips to ensure you keep your finances in check this Christmas

  • Use one of the many financial management apps to take a look at your finances and make sure you don't spend more than you can afford
  • Set a budget this Christmas for buying gifts for your friends and family
  • Make a list - challenge yourself on whether you want or need the items you're considering buying