We know December is a tricky month for many when it comes to money, so we did some research to understand how people plan to pay for Christmas and check whether there’s been a rise in people turning to buy now pay later schemes since our research last year.
Here are some of our key findings:
While we can understand it’s tempting to take the opportunity to buy something now and pay for it at a later date, the danger is these schemes can encourage you to buy items you otherwise couldn’t afford, and it’s very easy to start living beyond your means and getting into debt which you struggle to pay off.
This is particularly the case at Christmas as we know many of you feel under pressure to find that perfect gift, but if you buy items you can’t really afford, the consequences can be devastating both to your finances and your mental health.
Now you may be thinking there are no consequences to using a BNPL scheme, especially when some of them advertise that there is no interest and no late payment fees. But, what happens when you can’t pay on time? Well, they’ll ban you from using their services which seems fair, but they also may send debt collectors to your home to recover the outstanding balance.
Because of the way some of these schemes work, companies like Klarna and Clearpay can also make it seem super easy to get approved for credit. That’s because it is – with them. They don’t perform a full credit check, so you could be thousands of pounds in debt to other lenders, and they won’t know. Whilst getting approved for BNPL credit doesn’t harm your credit score upfront, if you struggle to pay, they may report your missed payments to credit reference agencies, which may impact your credit score in the end.
So wherever possible, we would recommend saving up and paying for an item all in one go – it has some amazing benefits not only on your financial health, but on your mental health too (just check out our YOPO campaign for more on this).
However, if there is a time you need to use buy now pay later, just make sure you’re using it moderately and keep a track of what you’ve spent so you know you can meet all of the repayments. As long as you go in with open eyes, you should be able to avoid any of the dark consequences we’ve mentioned.