ONE-FIFTH OF BUY NOW PAY LATER USERS ARE UNABLE TO PAY BACK CHRISTMAS SPENDING WITHOUT TAKING ON MORE DEBT

• 20% of adults who used a Buy Now Pay Later (BNPL) scheme at Christmas will be unable to meet repayments without borrowing more money.
• Almost one-quarter (25%) believe using these credit products has increased stress.
• The average amount spent by Buy Now Pay Later users at Christmas is £211, slightly up from £201 in 2019.

1 February 2021 – Over two-fifths (44%) of UK adults who used a Buy Now Pay Later scheme (BNPL) to fund their Christmas shopping are now concerned about their ability to repay, according to the latest findings by comparethemarket.com. Worryingly, one-fifth (20%) are unable to meet these repayments without having to take on more debt, reflecting the concern that these schemes can lead to spiralling debt issues, if not used responsibly.

The popularity of online shopping during lockdown is well known, and BNPL schemes are becoming an increasingly common alternative method of financing purchases. Two thirds (36%) of BNPL users saw it as a way to spread the upfront cost of Christmas spending over a longer timeframe. However, the findings reveal that these schemes encouraged unnecessary spending, since almost a third (32%) felt it made them spend more than they usually would and over two-fifths (44%) bought more extravagant gifts. 

The amount of money people spent on Christmas shopping via this type of financing has also increased this year. The average amount spent rose by £10 to £211 – an increase from £201 the year before. Broken down by age, the highest spending was by those aged between 45-54 years old, at £277.

Year Age Total

A third (33%) of people using a Buy Now Pay Later (BNPL) scheme for Christmas spending did so because they could not afford the purchase upfront at the time and wanted to delay the payment, and 23% say BNPL better suits their financial needs than other forms of debt, such as a credit card. Over one-quarter (26%) were also offered a special discount if they used the scheme – as some outlets have partnerships and discounts with BNPL providers.

James Padmore, head of money, comparethemarket.com said:

“With bubbles, shielding and tiers, Christmas was not what many of us had hoped it would be, but people still wanted to celebrate the festive season with gift giving. When used responsibly, Buy Now Pay Later schemes can be an effective and alternative way to spread out the payments of large purchases. It’s easy to see why it’s popular at a time like Christmas when people may be spending larger sums than usual. However, the ‘I’ll deal with it later’ attitude to using this type of financing may mean that some people are now really feeling the strain. Our findings show that this has unfortunately caught up with some customers who are now having to take on more debt to cover the cost of their Christmas spending. 

“If you need to take on credit, make sure you research all the options available to you and find the product to best suit your needs. One option could be a credit card, some of which offer 0% interest on new purchases for a fixed period. Before going ahead with a credit card application, it is always worth checking your eligibility using a soft credit search which won’t affect your credit score.”