Buy Now, Pay Later warning issued to parents
Eloise Hill
Content writerThese schemes can be a slippery slope for shoppers and Martin Lewis has spoken out against them, too
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Households have been warned to be avoid 'buy now, pay later' schemes for fear of racking up even more debt.
Citizens Advice says these schemes – that work by delaying and spreading payment for an item – are a slippery slope for shoppers.
The warning comes after the results of its own survey, which found half of 18-34 year olds using the scheme rely on using other forms of credit to pay the money back. That's simply shifting one debt to another, rather than clearing the debt owed.
Buy Now, Pay Later schemes have increased in popularity in the UK over the last few years, with 30% of 20-somethings having tried them.
In this new survey, Citizens Advice polled 2,288 users of the schemes over the past year and found only 52% of people repaid the money from their current account.
The remaining 23% paid with a credit card, 9% with their bank overdraft, and 7% even borrowed money from family and friends.
What's more, one in 10 surveyed admitted they didn't completely understand how their repayments would be set up.
Debt adviser from Citizens Advice in East Devon, Millie Harris, said:
'Most of the people I speak to who are using Buy Now, Pay Later live off overdrafts and credit cards, so are using these for repayments. It is just relying on one debt to pay off another debt.
'What scares me most is how easily people can slip into using it. They come to rely on it much more quickly than other forms of credit. It's just a few clicks at a checkout. Too often that means people don't realise how serious it is - that it is credit and there are consequences if they don't repay it.'
Credit card companies and banks have been able to see if customers use Klarna, the largest UK BNPL service, since the beginning of June.
Citizens Advice said this could positively or negatively affect shoppers' capability to get credit for loans like mortgages, whilst giving more clarity to potential lenders.
Financial expert Martin Lewis has previously warned parents against using BNPL schemes to buy school uniforms.
He's also warned that schemes like these can encourage people to spend money they don't have and negatively affect their credit scores.
A recent article about 0% interest credit cards on Martin's Money Saving Expert website read:
'Of course, with the cost of living crisis, it can be tempting to get one to fill gaps in your income. That's a mistake, as the need to repay it will just add to your future costs, and make life more difficult. Yet it's far far better to avoid borrowing to fill gaps in your income if you can.'
The same advice can be applied to Buy Now, Pay Later schemes too.
Worried about finances? Here are 28 genius ways to make some extra cash ... Or, if you're not sure how much pocket money to give the kids, this guide should help.
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