Two in five shoppers buy now, pay later and borrow to pay off debt | Buy now, pay later

More than two in five recent Buy Now Pay Later (BNPL) shoppers have relied on credit cards or other forms of borrowing to pay off their debts, charity Citizens Advice said.

The numbers showed that buyers were “piling credit on credit” and underscored the urgent need to regulate BNPL.

On Monday, Apple unveiled a BNPL feature for iPhones, which will first roll out in the US in or around September and could come to the UK a few months later.

BNPL allows buyers to stagger payments for goods without interest or fees – unless they don’t pay back on time, at which point some companies charge late fees. Typically, the cost is broken down into weekly, fortnightly, or monthly installments.

Two of the largest BNPL companies operating in the UK are Klarna and Clearpay and other big players are Laybuy and Zilch.

This form of credit has seen explosive growth during the coronavirus pandemic, particularly among those under 30 and those on a tight budget. However, the growth rate is believed to have slowed in recent months as the cost of living crisis has prompted people to cut non-essential spending.

In March, Citizens Advice conducted a survey of 2,288 people in the UK who had used BNPL in the previous 12 months.

More than two in five respondents (42%) say they use some form of credit to fund their repayments, with credit cards being by far the most popular option. Others included bank overdrafts, loans from friends and family, and personal and payday loans.

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Younger buyers were most likely to borrow to pay off BNPL purchases. The charity found that 51% of 18-34 year olds borrowed money to pay off BNPL debt.

The government has announced that BNPL is to be regulated by the Financial Conduct Authority, although that is unlikely to happen before the end of this year or in 2023. Citizens Advice wants this regulation to include affordability reviews by all participating businesses and clearer information at online checkouts.

Millie Harris, a debt counselor at Citizens Advice East Devon, said using credit cards and other types of borrowing for repayments is “just relying on one debt to pay off another debt”.

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