UK retailers enjoy strongest pace of growth in 25 years - money.co.uk offers guidance on minimising debt effectively

UK retailers enjoy strongest pace of growth in 25 years - money.co.uk offers guidance on minimising debt effectively

Posted 14 July, 2021 at 11:30

Author Mark Bradshaw on behalf of (ISW) Independent Shop Watch


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: 

  • One in five (19%) shoppers admit BNPL is a way to buy now, and worry later
  • One in eight (13%) of 18-24 year olds say influencers encouraged their decision to use BNPL
  • 18-24 year olds are more likely to use BNPL schemes (54%) than a credit card (49%)
  • One in six (16%) say BNPL schemes led them to purchase more than they could afford 
  • Average BNPL users owe £244.37 and take nine months to repay
  • On average, BNPL platforms expect payment after 49 days but the average consumer said it takes 261 days to pay. That’s 186 extra days in debt. 
  • When asked what products or services they had purchased using a BNPL platform, more than a third of respondents (33%) said that casual wear was their main spend, followed by eating out (31.4%) and beauty products (25.7%) 

 

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:

  • Make a budget - If you have different types of debt, the first thing you should do is make a budget and use the information within the budget to work out what your priority bills are. If you’re not sure how to make a budget, then this guide from StepChange could be useful.  
  • Decide which bills to pay first - With so many bills being paid out each month, it can be tricky to know which ones to pay first, even once you have completed your budget. 

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.

  • Understand the difference between BNPL and credit cards -  While BNPL services often promote themselves as an alternative to credit cards, in reality the savings offered by BNPL borrowing are at best negligible compared with traditional credit cards. 

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.

  • Dealing with BNPL debts - Our report found that as many as 18% of shoppers pay for utility bills with BNPL schemes, whilst 14.3% are using them for rent and more than one in ten have needed one to purchase their children's school uniforms. 

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. 

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