With the announcement that British retailers have witnessed their strongest quarter of growth for more than two decades, the personal finance experts at money.co.uk have cautioned against spending beyond means.
As part of its recently updated ‘Shop Now, Stress Later’ report, the personal finance experts at money.co.uk revealed that during the pandemic more and more consumers have turned to internet shopping, driving a boom for retailers who sell online.
While this is of course positive for the retail sector, the financial pressures associated with the past year have meant that an increased number of Brits are now turning to Buy Now Pay Later (BNPL) schemes in order to spend now, and worry about the consequences of debt at a later date.
A recent investigation by the FCA found that usage of sites like Klarna, Clearpay and Laybuy had nearly quadrupled to account for £2.7bn of spending during 2020.
Research conducted in June 2021 on more than 2,000 UK shoppers found the following:
For those currently concerned about their level of credit card or BNPL debt increasing as the nation continues to recover from the pandemic, James Andrews, senior personal finance editor at www.money.co.uk, offers up the following guidance:
It’s important to know the difference between a priority bill and a non-priority debt. An example of a priority debt would be your rent or your mortgage, as the consequences of not paying that could mean you lose your home - this type of bill must be paid before any other debts.
For more information on which debts to prioritise, this article on the StepChange website could help: What debts to pay first from your budget.
BNPL platforms lock customers into rigid repayment schedules that offer little flexibility and large penalties for failing to meet debt deadlines. In comparison, if managed responsibility, credit cards offer far more flexibility. Using the right credit card lets you split payments over as long as 21 months currently, with almost no card charging you for the first 56 days or so.
What’s more, credit cards can also offer you cashback on purchases, loyalty points with major retailers, Avios or other travel perks and extra protection thanks to Section 75 of the Consumer Credit Act.
If you have been using BNPL to make ends meet, then there is a helpful guide on the StepChange website on how to deal with BNPL debts which includes plenty of helpful advice and links on where you can get help with managing your repayments.
The full, updated ‘Shop Now, Stress Later’ study for 2021 can be found here: https://www.money.co.uk/credit-cards/bnpl-stress
All accompanying imagery can be found here: https://drive.google.com/drive/folders/14ZsnyAEPEgCleR6k-2g0dMPDVLqYf4jr?usp=sharing
Please credit any of the research or above content used with a link back to: https://www.money.co.uk/credit-cards/bnpl-stress
Sources & Methodology
*A survey of 2,016 UK respondents aged 18-55 about their buy now pay later service usage during August 2020 and a survey of 2025 UK respondents aged 18-55 about their buy now pay later service usage during June 2021 on behalf of money.co.uk.