Parents warned against using ‘buy now, pay later’ to buy Christmas presents by debt charities

DEBT charities are urging shoppers against using “buy now, pay later” this Christmas as research shows parents are increasingly using the service.

New findings by payment firm Worldpay show a rise in those aged 30 to 54 years old using “buy now, pay later” to pay for items online.

The new research, as reported by , also reveals how a fifth of older people are more likely to spend money at a retailer if “buy now, pay later” is available. 

This is compared to just 12% of younger people, aged 18 to 23, who said they use the service to afford items.

But charities say the rise in “buy now, pay later” could spark a debt crisis as they claim customers can easily overestimate what they can afford.

“Buy now, pay later” lets shoppers buy items on credit and pay for it later, with payments usually spread out over several months.

The first payment can be made usually a month later, although this varies depending on the website you use.

Klarna and Clearpay are just some of the lenders offering “buy now, pay later” financing. 

But the research doesn’t name any lender in particular and talks about “buy now, pay later” as a service on the whole.

Sue Anderson of StepChange said: "Buy now, pay later can be a tempting source of quick and easy-to-obtain credit, but it can be all too easy to overestimate what you can afford. 

“Don't forget that the reason retailers offer BNPL is because it helps them to sell more than they otherwise would.

“These services must give clear, plain English information for customers – especially those that could have the potential to see them build up debt.”

Varun Kanish, campaigns manager at Turn2us, said: “The coronavirus pandemic has had a devastating effect on people’s incomes and has wiped what little money some people had saved for a rainy day.

“Many of us will only be able to afford Christmas presents this year by using credit, including buy now, pay later schemes.

“But while these schemes may seem enticing, they hit people on low incomes hardest. We urge anyone considering using credit to pay for Christmas to look into alternatives, such as charitable grants, and to ensure they are claiming all the benefits they are eligible for at this time.”

The latest research comes after a separate warning from Money and Mental Health Policy Institute, founded by Money Saving Expert's Martin Lewis, claimed people with mental health issues were more likely to be exploited by “buy now, pay later” services.

The debt charity suggested people with a range of mental health issues often struggle to control their spending.

This, combined with pushy tactics from retailers like marketing emails and personalised recommendations, also increase the risk of overspending.

Martyn James, consumer rights expert at Resolver, said: “Buy now, pay later credit is the new payday lending in many ways.

“Though this new way to pay doesn't result in the horrific interest of the old payday loans, it's very, very easy to spend too much or lose sight of what you've paid for.

“And that can lead to your outstanding bill ending up with debt collectors.”

A Klarna spokesperson said: “We provide a better and more transparent alternative, with no interest, no late fees and clear repayment schedules. 

“All customers have spending limits, we do not provide an open line of credit and the majority of customers have an extremely positive experience.”

A spokesperson for Clearpay added: “We strongly encourage our customers to spend flexibly within sensible limits.

“Our product was purposely designed as a budgeting tool that operates differently to traditional credit products and, importantly, other buy now, pay later products.

“As such, Clearpay gives shoppers an alternative to traditional credit and the freedom to buy today and pay in four instalments over a six week period, interest-free.”

The regulator of the financial industry the Financial Conduct Authority (FCA) .

It comes after "threatening" debt letters that "make people suicidal" were banned in October after a campaign by Martin Lewis.

We reported on how an online shopping sprees using "buy now, pay later" schemes left one shopper £1,500 in debt and homeless.