Buy Now, Pay Later – 78% of Brits in the dark over risks involved

A

lmost eight in 10 Brits (78%) have admitted to being unclear about the risks associated with missing Buy Now, Pay Later (BNPL) repayments despite being outlined in their credit agreement.

Risks include high interest rates leading to larger sums needing to be repaid, an impact on one’s credit score and future savings and borrowing prospects. This is according to NerdWallet's Consumer Borrowing Index, a nationally representative survey which investigated attitudes towards spending and borrowing among 5,000 adults living in the UK.

These findings are even more pertinent considering the growing popularity of BNPL. Three in 10 of the shoppers surveyed had used schemes, such as Klarna and Afterpay, making BNPL the second most popular form of credit among those surveyed. Consumers still preferred traditional methods of borrowing, such as credit cards and store cards, which came out on top, outranking BNPL in the survey.

Although usage of BNPL schemes is growing, the debate around their safety rages on. The issue has split the nation: 43% of survey respondents regarded these schemes as risky, while 47% saw them as a safe way to spend.

Even though a small majority felt safe when using BNPL schemes, over half (51%) admitted to not always reading the T&Cs, which NerdWallet discovered takes an average 36 minutes to read through. Ironically, nine in 10 agreed that it is important to fully understand the T&Cs of a credit or loan product before using it.

Almost half (46%) of consumers also lacked knowledge on whether BNPL schemes are regulated by the Financial Conduct Authority (FCA) and over a quarter (28%) didn’t know how using them resulted in the loss of their Section 75 Consumer Protection. The NerdWallet findings highlight the potential dangers as BNPL services become increasingly available in the absence of consumer awareness of the risks associated with frivolous spending.