A few weeks ago, I took part in a UK Money Bloggers conversation about Buy Now Pay Later. Companies like Klarna are everywhere now and there’s a lot of strong opinions about them.
The UK Money Bloggers have much more articulate opinions and statistics on BNPL than I do, but I thought I would try and put some thoughts on paper. Hopefully, this post might offer some guidance if you are considering using BNPL.
Here are some thoughts on whether or not you should use Buy Now Pay Later services.
- Things to consider about Buy Now Pay Later
- When Buy Now Pay Later goes wrong
- The benefits of BNPL
- Can you use Buy Now Pay Later responsibly?
- Where to get help if you need it
Things to consider about Buy Now Pay Later
Nearly half (45%) of 18-24 year olds have used BNPL in the past year, according to The Money Charity. So, to simply say “don’t use BNPL” would not be particularly helpful.
People do use it and will probably continue to, particularly if it remains as easy to use as it currently is.
If you are one of these people, try to consider some of these things before you make purchases using BNPL.
Firstly, Which? said missing a credit repayment or bill or experiencing a major life event – like getting married or moving house – increases the odds of using BNPL by around a third.
Emotional spending is something a lot of people, myself including, struggle with. If you’re buying items after a major life event, take a minute to think about why you’re making the purchase. Is it to make yourself feel better or because you think you should buy something? Or do you genuinely need the items?
Removing your emotions from your purchases can lead to a dramatic reduction in your spending.
In a Which? survey of 2,000 people, 24% said they spent more than they planned to because BNPL was available.
Buy Now Pay Later firms don’t want you to think about your purchases. The longer you think, the less you spend generally.
If you struggle with impulse buying, try putting an event in your calendar with the link to an item you like a week after you first saw it. Have a look at it when the event comes round and see if you still want it. You’ll be amazed how often you no longer want the item.
When Buy Now Pay Later goes wrong
BNPL can be incredibly dangerous if it goes wrong.
Firms do take action against customers who missed a payment, but the action varies between providers.
Your debt can be passed onto a debt collection agency. This can leave a negative mark on your credit report for at least 6 years.
Many organisations have also raised concerns about Buy Now Pay Later firm’s affordability checks.
Credit cards, for example, do extensive checks to see if you can afford the level of credit you’re given. BNPL firms don’t do the same level of checks, so companies like Which? are concerned that individuals are being given credit they can’t pay back.
It can also be easy to use BNPL accidentally.
I was buying a playsuit online from H&M a couple of weeks ago. Without meaning too, I almost paid using Klarna. This is because it was the default option on the payment screen. I was only spending £30 – hardly an amount worth getting into debt over!
Having spoken to friends, this seems to be a common occurrence. A lot of companies now have Klarna, or another Buy Now Pay Later firm, as their default payment option. Keep an eye out for this if you want to avoid using BNPL.
The benefits of BNPL
Despite the negatives, there are some benefits to Buy Now Pay Later.
You may want to buy an outfit for a wedding or party online. While you don’t want to buy 5 outfits, you may well want multiple options to try.
If – and this is a big if – you are confident you will be disciplined enough to return the outfits you don’t chose, BNPL could be an option for you. This way, most of the money won’t leave your bank account before you’ve returned the items.
Some also recommend some BNPL companies for larger purchases – like furniture or even holidays. These are often things you would think carefully about and budget for. Therefore, spreading the payments out could help your budgeting process.
Another reason some people use BNPL is if they’re struggling to make ends meet in the run up to pay day. If you’re running low on funds, you could do a food shop using BNPL and then pay for it after your paycheque clears.
Can you use Buy Now Pay Later responsibly?
This depends on you. Just like credit, some people can manage BNPL responsibly, others can’t help but get carried away.
If you are disciplined and know you have the money to pay for the items, it can be a useful tool. Like any loan, it can help with short-term cashflow issues and become part of your budgeting strategy.
Others might struggle. If you are prone to overspending or struggle with debt, it might not be possible for you. BNPL could become another temptation you don’t need.
Where to get help if you need it
If you are struggling to make your BNPL repayments or are getting into significant debt as a result, do seek support.
Contact your creditor and explain that you are struggling to meet the repayments to see how they can help.
Charities like Step Change offer free and impartial advice. They can help you create a plan and set you on the right path.
Citizens Advice also has some really useful information on BNPL.
Do check out the other bloggers who took part in the Buy Now Pay Later discussion. They are: Andy (Be Clever with your Cash), Naomi (Skint Dad), Marie (Broke Girl in the City), Krystle McGilvery, and The Financielle.
If you enjoyed this post, please like and share it across social media or with your friends! I’d also love to hear your thoughts and experiences. I hope you enjoyed this post about Buy Now Pay Later. Do you like to use BNPL companies or do you prefer to pay for everything up front. Comment your thoughts below.
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