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Protecting your loved ones (and yourself) from buy now pay later (BNPL) schemes may turn into a full-time job this Christmas because retailers of every style and size are offering shop now pay later services from firms like Klarna, Clearpay and Laybuy.

These Fintech firms have got a good thing going because retailers are snapping them up, and millennials are too; with enticing interest-free payment plans drawing them in, surely it must all be fine?

Not so much when it’s all currently unregulated!

This new spending technology has shoppers in a frenzy this Christmas with unlimited spending possibilities.

But, there’s a downside to this considered ‘upside’, spending money you don’t have! It’s all debt at the end of the day, whichever way you view it and debt is limiting and crippling.

The ad execs hired by these Fintech companies have hit right on the money using celebrities in their adverts to endorse their services and brand.

Using celebrities such as Snoop Dogg to promote these brands is a form of persuasion marketing and is shown to be highly effective.


Why are buy now pay later payment options a bad thing?

While they predominantly offer ‘interest-free’ payments, these types of ‘shop now pay later’ schemes are still debt. If the regular payments cannot be met, it could be handed over to a debt collector who may use unpleasant ways to recoup that debt and even add interest!

This delayed or spread the cost payment option is nothing new; retail catalogues have been offering this sort of payment method for eternity.

The trouble is, this new way of paying is done digitally, instantly, easily and doesn’t provide any time or room to consider the potential long term consequences. No one knows what tomorrow will bring!

Anything that seems simple with the least hassle and provides a rapid result is a win in this day and age, and buy now pay later schemes offer this to their audience.


How do buy now pay later payment options work?

If you want to buy something but don’t have all the cash for it at that moment, ordinarily, you would walk away unless you use some other form of credit and debt.

The shop now pay later options means you don’t have to pay anything for the first 30 days, or you can pay in instalments (usually 3) and make the first payment immediately.

For example, you may wish to buy a new laptop costing £399; online retailers then use a service like Klarna to split the cost over, say, 3 months (without interest), making it £133 per month from purchase.

This seems like a good idea, and that may be the case for those who are financially savvy. But, if you are not living within your means and know how to make money work for you, this is a recipe for potential disaster and woe.

Allegedly, if you keep to your monthly payment obligations, it will not impact your credit score, but some options also charge a fee if a payment is just 24 hours late.


Why could this become a problem?

StepChange, the charity that helps those struggling with Debt, has expressed their concerns about how this will impact people already struggling to juggle their income and outgoings. With greater concern for this festive season.

Rather than working to earn a wage and then buying things with disposable income or savings, since the 1980s and the economic boom, people have been spending on credit and ramping up their personal debt like kids in a candy store. And with buy now pay later schemes so readily available at the click of a button, it can only get worse!

With the Fintech providers of these payment options using clever and not necessarily moral advertising methods across the whole spectrum of marketing spaces, they can entice everyone and anyone to use their system. This was proven to be the case when one of Klarna’s ads was banned by the Advertising Standards Authority.

Thanks to charities, campaigners and organisations, the Financial Conduct Authority (FCA) has agreed there are issues and is in consultation with the Government and related departments to regulate the BNPL market.

Whether it is yourself or your loved ones, everyone needs to know the dangers of these get into debt easy payment schemes and see them for what they really are, a potential problem waiting to happen.

The best way to buy things is to ensure you use smart budgeting tools to help you keep track of income, outgoings, and savings and if you or a loved one is in debt, talk to a debt charity who can help.