Two in Five Buy Now, Pay Later Borrow Money to Pay Off Debt | Buy now, pay later
More than two in five recent buyers who buy now, pay later (BNPL) have used credit cards or other forms of borrowing to pay off what they owed, the charity Citizens Advice says .
He said the figures showed buyers were “piling borrowing on borrowing” and stressed the urgent need to regulate BNPL.
On Monday, Apple unveiled a BNPL feature for iPhones, which will initially launch in the US around September and could come to the UK a few months later.
BNPL allows buyers to stagger payments for goods without interest or charges – unless they fail to repay on time, in which case some companies charge late fees. Generally, the cost is divided into weekly, bi-weekly or monthly installments.
Two of the biggest BNPL companies operating in the UK are Klarna and Clearpay, and other big players include Laybuy and Zilch.
This form of credit has seen explosive growth during the coronavirus pandemic, especially among those under 30 and those with tight finances. However, the rate of growth is thought to have slowed in recent months as the cost of living crisis prompted people to cut back on non-essential spending.
A survey was conducted for Citizens Advice in March of 2,288 people in the UK who had used BNPL in the previous 12 months.
More than two in five respondents (42%) said they use some type of loan to fund their repayments, with credit cards being by far the most popular option. Others included overdrafts, borrowing from friends and family, personal loans and payday loans.
Young buyers were the most likely to borrow to repay their BNPL purchases. The charity found that 51% of 18-34 year olds had borrowed money to pay off BNPL debts.
The government has said the BNPL is to be regulated by the Financial Conduct Authority, although this is unlikely to happen before the end of this year or in 2023. Citizens Advice wants this regulation to include affordability checks by all participating companies and clearer information when making online payments.
Millie Harris, debt counselor at Citizens Advice East Devon, said using credit cards and other types of borrowing for repayments “just relies on one debt to pay off another”.
Comments are closed.