Searches for ‘buy now pay later’ peaked in October and November over the past two years. Half of UK adults (26.4 million people) have used a BNPL scheme, with the services proving most popular among Gen Z and Millennials.
However, experts are warning consumers to approach these flexible payment options with caution. For example, more than half (53%) of BNPL users have been charged fees for missed or late payments.
A YouGov report also revealed that these schemes have more than tripled over the last three years, with customers spending £82.90 a month on average, highlighting the growing demand for these services.
While BNPL services can offer a convenient way to spread the cost of high-priced items, the danger lies in the ease with which consumers can overspend.
Paul Stringer, director at Norton Finance, says: “The temptation to ‘buy now and pay later’ can encourage shoppers to spend more than they can realistically afford.
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“While Buy Now, Pay Later (BNPL) services like Klarna, Clearpay, and Laybuy may seem like a convenient way to manage spending during events like Black Friday, they can often lead to overspending and hidden financial strain.
This advice applies to two primary BNPL types:
- Interest-Free Deferred Payments: Splitting purchases into instalments over weeks or months with no interest (e.g., Klarna and Clearpay).
- Interest-Bearing Credit: Some BNPL options introduce interest if repayments exceed a certain period, as seen in more traditional financing plans.
“Consumers should remember that BNPL options are still a form of debt,” says Paul. ” Without careful planning, repayments can quickly become unmanageable, especially when paired with interest or late fees if terms are not met. Always prioritise spending within your means and avoid using credit for non-essential purchases.
“It’s essential that consumers weigh the benefits against the risks of falling into debt.
“Understanding the implications of using BNPL services is more important than ever. With careful planning and responsible usage, people can enjoy the benefits of flexible payments while avoiding the pitfalls of debt.”
To help shoppers navigate buy now, pay later responsibly this Black Friday, Paul has outlined five expert tips:
- Set a budget: Determine how much you can comfortably afford to spend without impacting your financial stability.
- Use a separate account: Consider opening a dedicated account for BNPL purchases to better track and manage this spending.
- Seek out discounts: Check if the item is available at a lower price elsewhere, as some retailers may offer discounts for upfront payment.
- Monitor your spending: Closely track your total expenditure to avoid exceeding your budget.
- Plan for repayments: Ensure you have a clear plan in place to repay any debt accumulated through BNPL services.