Debt charities are warning consumers on the risks of using “buy now pay later” firms to make online purchases.

Over the past 12 months there has been a huge surge in firms which offer “buy now pay later” payment options teaming up with popular online retailers to offer a supposedly more flexible way to pay for goods.

However; what some consumers don’t realise is that paying in this way can adversely affect their credit score. It has been found that when consumers miss the final date or their payment (often 14 or 30 days from the date of the original purchase, rather than being told by the firm that their late payment can be marked on their credit score as an unpaid bill and be passed to a debt collection agency, many are receiving emails saying they have been given seven more days to pay.

This lack of clear information has prompted charities including Stepchange, the Money Advice Trust, the Debt Support Trust, and Christians Against Poverty to call on “buy now pay later” firms to better explain these risks to their customers, particularly in the advertising they put out, according to the BBC.

There is also a worry that “buy now pay later” schemes could be landing young people in debt. These firms themselves openly boast that the schemes encourage consumers to spend 20-30% more than they would without the service.

There seems to be a clear younger target market for the schemes; retailers currently using “buy now pay later” firms include Boohoo, Quiz, Pretty Little Thing, and JD Sports. Hair salon Toni & Guy have also announced they will be offering the scheme for customers over the coming months suggesting consumers will soon be able to purchase a wide range of goods and services without seeing the immediate cost withdrawn from their accounts.

Should I Use a Buy Now Pay Later Offer?

Whilst on the face of it, being able to spread the cost of purchases over a period of 30 days rather than pay on the spot may seem like a very attractive option, especially for those earning a weekly or non-regular wage. However, there are risks involved.

Firstly, psychologically consumers are encouraged to spend more as they won’t have the reality of seeing the money go out of their accounts in an immediate payment. Secondly, once the consumer has made that big purchase, the reality of having to pay will dawn as the payment day draws closer and if, when that date comes around, you don’t have the funds to pay, regardless of whether the “buy now pay later” firm gives you a payment extension, the late payment could be marked on your credit score. Having this kind of mark on your credit score can adversely affect applications for finance in the future such as mortgages so are not to be taken lightly.

It is always advisable to live within your means. Always consider whether the purchase you are making is important enough to pay with credit or payment terms. For example, an unexpected bill to fix a boiler or a car could understandably be paid using credit where absolutely necessary but the purchase of clothes or even a haircut can certainly wait until you have the funds available to pay then and there.

If you are worried about mounting debts it is vital you speak with a debt specialist at the earliest opportunity. Farleys personal insolvency team can discuss ways you can manage your debts and move forward towards a debt free future. Call 0845 287 0939 or send your enquiry through our online contact form.