What you need to know about using Buy Now, Pay Later services

*PLEASE BE AWARE THIS IS AN OLDER POST AND THERE MAY BE A MORE UP TO DATE POST, OR UPDATED INFORMATION AVAILABLE ON https://www.citizensadvice.org.uk/ *

What is Buy Now, Pay Later?

Buy Now Pay Later (BNPL) services are credit options that allow you to spread the cost of a purchase over a period of time, most often over a number of weeks or months. Examples of BNPL services include Klarna, ClearPay, LayBuy, and PayPal credit. The services are free to use, and offer a 0% interest rate over the repayment period and ultimately a popular choice for consumers. With the cost-of-living crisis hitting consumers hard financially, there is no doubt that more and more people are turning to products like these to ease some financial burden, with Forbes reporting that BNPL services have seen a huge rise in usage as a result of the cost of living crisis.

These services can be a helpful option for many people but there are risks consumers should be aware of before using these services.

Why is it a risky service?

These BNPL products are currently unregulated, and the services make use of an exemption in the regulation for payments involving a maximum of 12 instalments over a maximum period of 12 months. This is why you often see the repayment options for BNPL being over a shorter period of time, often only weeks and months. 

Previous research by Citizens Advice has shown that many consumers do not realise that they are using a credit product when they use BNPL. Consumers may find themselves making uninformed decisions about using the services, and signing up to repayment agreements that they later find to be unaffordable. Affordability is key when deciding to use BNPL services as they are credit products, but the lack of information provided can mean consumers too easily enter into agreements and are at risk of spending more than they can ultimately afford. 

The extent to which a BNPL provider does an affordability check varies from service to service, but it is unlikely you will undergo a hard credit check before being approved for the service. This means that any soft checks that are done are invisible to other lenders, and other lenders would not be aware that you may already be struggling with repayments with another provider. 

How do repayments work?

Any repayments to BNPL providers are debts you owe, so if you decide to use a BNPL service, you should be aware of how repayments work, and what can happen if you fall behind. 

Repayments can work differently for each provider, so consumers should be aware of how their specific provider handles repayments. Some providers may set up repayments automatically, whilst others require users to schedule their own. This information is often unclear at checkouts and so missed, with the resulting confusion causing missed payments as consumers may not have the money available at the time of the automatic repayment, or they don’t know how to set up their repayments themselves. If a consumer has multiple BNPL agreements in place with different providers, this can become very difficult to keep up with.

Some providers also charge late fees for missed payments. These can be anywhere from £6 to £12 normally, but the late fees can easily add up, causing more financial burden on a consumer. 

Should I use BNPL?

Buy Now Pay Later can be a useful service for some who are looking to borrow money quickly and smoothly. However, the most important thing to consider when potentially using a BNPL service is affordability. You should only borrow from these services if you are confident you will be able to make the repayments, even if your finances unexpectedly reduced.

You should also ask yourself if the purchase is necessary, and whether you would have made the purchase if there wasn’t an option to use BNPL. 

Many may be turning to BNPL services to pay for goods whilst waiting for other money to come into their bank accounts, like wages or benefits. It is important to understand that there is other help available to you to afford your essentials. If you’re struggling with food and are considering using BNPL, then you should check out the various food pantries and food banks located around the Borough. You can find a map of food pantries on our website, alongside other resources to help with the cost-of-living. If you’re needing a food bank referral, then you can drop in to our offices between 9am and 12 pm in Leigh and between 10am and 1pm in Wigan. 

The council may also be able to help you through the Household Support Fund. Anyone can apply for support. You do not need to be in receipt of benefits to apply. You can find out more about what support is available through the Household Support Fund on the Council’s website.