Spending Habits - The dangers of Buy Now, Pay Later.

A word of warning about credit for low cost goods
Mar 24, 2021 by Ross Jefferies

No holidays and no meals out have meant that a lot of us have had money floating around that we may not usually have had. This, in combination with the joys of having a parcel turn up at your door to break up the monotony, has meant more of us are turning towards online retail therapy to get us through to Summer. I won’t preach about how you shouldn’t do this, you shouldn’t do that, but I will just give a word of warning to how you may be financing these purchases and what impact it may be having on you without realising.

Long before Lockdown 1.0, the sequel; Lockdown 2.0 and the unholy trinity of a trilogy Lockdown 3, internet shopping has been on the increase. Whilst it is best to support local, independent businesses, it is understandable that ease and lower costs often take precedent. One danger of internet shopping, however, is not spoken about enough and that is the slippery slope of Buy Now, Pay Later.

Buying something through a Buy Now, Pay Later (BNPL) credit scheme in theory is fine but it is only kicking the can down the line into the future. Many of the brands like ASOS and H&M that use BNPL as a method of payment aren’t massively high-ticket items, so there is a case that if you can’t afford the entire payment now for those smaller items, you simply can’t afford it.

Further issues arise through BNPL not being regulated in the same way as other forms of credit such as credit cards. However, there has been some changes with this within the last month ensuring that regulations will come in to protect consumers. But this could take some time to be fully implemented.

It is well worth checking out https://www.gofundyourself.co/bnpl which is run by Alice Tapper who has been campaigning for BNPL regulations for some time now. On the site, there is the staggering fact that “41% of consumers are unaware the ‘default’ of a missed payment appears as a black mark on their scores”. This then translates to it being difficult, if not impossible, to get a mortgage, with recent figures showing that 1.09m people with adverse credit could be looking to buy a property in the next 12 months. Obtaining a mortgage with adverse credit means that the lender will deem it to be more risky to lend the money and will therefore charge a higher interest rate.

So What? My main point is, be careful as it can be all too easy to get onto the slippery slope of credit lending and harder to get out of what can be a cyclical process. Many online shops have credit as the default and some such as Very.co.uk offer the option of signing up for a credit card loan. Genuine reasons for credit, such as properties, car leases, financing bigger purchases such as furniture are fine, but to use credit to be buying non-essentials, especially low cost goods is probably not the best way forward.

Contact us today and let us help with your financial journey

If you prefer to call us, please dial 01892 559555 or if you wish, email: journey@panoramicwealth.co.uk with your enquiry.