Buy Now Pay Later – spoiler alert, ‘later’ is just around the corner – Money Week 2023
More and more people are now using buy now pay later (BNPL) arrangements to put off the day when we have to pay for what we buy. It’s buying something ‘on tick’ as we used to say. You just get a little more time to pay off the full cost of what you have bought. It doesn’t save you any money – you still pay the same for the goods you buy, but it can give a false sense of being able to afford something you would otherwise swerve.
Many people who use these systems aren’t aware that if something goes wrong, they have to pay late fees and, increasingly, marks on your credit file.
You are running up debt by using BNPL. We had a look at Money Saving Expert’s advice and their advice is that before you click yes to Klarna and ClearPay, you should ask yourself these three questions:
- Would I have bought this item in the first place if BNPL wasn’t an option?
- Am I sure I can meet all the repayments?
- Is BNPL the best form of borrowing out there for me or is there a cheaper or safer way of borrowing?
If you answer ‘no’ to any of these questions, then you should probably stay well away from BNPL. Most students can access a 0% overdraft, so if you really need that item, your overdraft may be a better option. Likewise a 0% credit card may only require the minimum repayment. You will be repaying for longer, but the terms of using a credit card are potentially more manageable.
The problem with student income is – it is fixed, and doesn’t come in very often, so spreading the cost over a few weeks is unlikely to help, and could give you the false sense of security that you still have money in your bank– when it is usually all accounted for already.
The most common form of BNPL lets you spread your shopping costs over a short period, typically a number of weeks. But exactly how far you can spread your costs and the frequency of repayments will depend on which BNPL provider you use – by signing up to a certain BNPL provider, you agree to its repayment terms and conditions.
DON’T let yourself overspend if you know you’ll struggle to repay what you borrow.
Credit card consumer protection doesn’t count for BNPL as you are paying through a third party, so you have no safeguards.
With some BNPL providers, you risk being charged late fees if you miss a repayment – something nearly half of users are unaware of. This can happen, for example, if there isn’t enough money in your bank account when an instalment is due. Not only do missed payments result in you being charged fees for a late payment, but they can also hurt your credit score – affecting borrowing in the future.
So, as with any non essential purchase, apply the mantra:
- Do I need it?
- Can I afford it?
- Can I get it cheaper somewhere else?
Today, the Money Week roadshow is at 2 different locations so come and see us at Moulsecoomb campus 12pm – 2pm outside Aldrich library or Darley Road campus in Eastbourne in the Book & Bean cafe, also 12pm – 2pm.
Student Advice Service