Buy Now Pay Later is everywhere right now. It’s estimated we spend close to £1 billion per month in this way, and there’s an ever-growing list of retailers who let you to pay like this, even takeaways!
Buy Now Pay Later lets you pay for products in equal instalments over several months or delay your payment entirely for a period of time. It’s often presented as the easiest way to pay, and you might even be offered a discount if you use it.
It seems like a great deal, but is it as good as it sounds?
If you’re in control of your finances, don’t overspend, and have a sustainable budget then it might be a good option. It means you can spread the cost of payments, so you aren’t paying a large amount of money upfront.
However, lots of people don’t realise Buy Now Pay Later agreements are a form of credit. Some lenders, such as Klarna, report balances, missed and late payments to credit reference agencies. This means your payment history can be seen by other lenders who could refuse you credit in the future. Missed or late payments can stay on your credit file for up to seven years, so they can continue to have an impact for a long time after you graduate.
Buy Now Pay Later also encourages you to overspend or buy things you might not usually be able to afford. A £900 phone doesn’t seem as expensive when you only have to pay £300 per month.
Citizens Advice looked at Buy Now Pay Later checkouts across the UK’s top 100 retailers. Not one of these retailers warned customers they could be referred to debt collectors, and only eight checkouts warned customers upfront they were taking out a credit agreement.
For most people, Buy Now Pay Later agreements are best avoided because they can have a long-term impact on your finances.
If you do use them, we’ve included some tips below to help you use these agreements safely and stay in control:
- Avoid using Buy Now Pay Later if you’re already in debt or struggle with budgeting.
- Think about whether you’d be able to afford the repayments if something unexpected happened, such as a car breaking down or your bills going up. If the answer is no, it’s best to avoid the purchase.
- Read the terms and conditions carefully so you know exactly what you’re signing up to.
- Stick to your budget. Buy Now Pay Later encourages you to spend more than you can afford.
- Look out for notifications from your provider telling you when your next payment is due.
- Use your debit card to make repayments. Making repayments with a credit card means you’ll only push the debt further down the line.