Buy Now Pay Later

When you’re offered Buy Now Pay Later (BNPL) at the checkout, this is a credit agreement – a form of borrowing.

Some retailers have their own BNPL scheme, but usually it’s run by a third-party provider.  If you keep to your repayment plan, you won’t usually pay interest or charges. 

If you’re offered BNPL, you’re likely to be able to choose between two repayment options:

• Paying in several equal payments. You pay off the cost of the item regularly, usually fortnightly or monthly, or over a few weeks or months.
• Paying the full amount in one go after a fixed period. You get a set interest-free period and only pay on an agreed date if you decide to keep the items. This can be useful if you want to try an item before you buy as you can return the goods without paying for them if they’re not right.

BNPL can be a useful way to spread the cost of purchases if you use it carefully and can afford the repayments. Here’s what you need to know before using it.

Some retailers encourage people to choose BNPL over other ways of paying by making it the default payment option or offering an incentive, such as a discount or free delivery.

But it’s important to give yourself enough time to think about how you’ll repay, and decide if BNPL works for you.

It’s important to understand what you’re signing up for by checking the terms and conditions, as most providers take a different approach to charges and late fees. Some even charge if you repay what you owe early.

As with any type of borrowing, there are risks you need to be aware of – especially as BNPL isn’t regulated in the same way as other consumer credit products and not subject to the same warnings.

Having lots of BNPL agreements of small amounts can start to build up. As well as checking you can afford all repayments on top of any other bills, make sure you keep track of when every payment is due.

As most BNPL products aren’t regulated, many providers usually only carry out minimal affordability checks – relying on (‘soft’) credit checks before they approve you. As a result, they won’t know whether you can afford to repay what you owe.

MoneySavingExpert lists which credit reference agencies BNPL providers report toOpens in a new window More BNPL regulations are set to be introduced in the future.

BNPL agreements that last fewer than 12 months aren’t regulated by the Financial Conduct Authority (FCA). This means you don’t get full consumer protection if something goes wrong or you feel you haven’t been treated fairly.

However, if the complaint is with the retailer rather than the BNPL provider, you do have protection and can make a complaint. Find out more at Citizens AdviceOpens in a new window

Some BNPL providers offer in-house dispute resolution services, but they won’t be impartial and the service and response you get will vary.

If you pay for something costing over £100 and up to £30,000 by credit card and there’s a problem, for example an item is damaged or broken, you can make a complaint to your lender  and ask for a refund under section 75.

However, even if you use a credit card to make a BNPL payment, you’re not covered under section 75. This is because the payment is made by the BNPL provider to the retailer. Be aware of this if a BNPL provider offers the option for you to pay using the credit card you have stored with them – if you agree, you’ll lose section 75 protection.

Before you buy anything, check what buyer protection your BNPL provider offers. For example, some providers will pause payments until the issue is resolved and refund any payments you’ve already made if the dispute is settled in your favour. However, be aware these are policies rather than legal rights.

Some BNPL lenders make a ‘hard’ credit check every time you spread payments over a long period. These checks will appear on your credit record and can affect your credit score. Missing a deadline for a payment will also damage your credit score.

Even if your BNPL purchases don’t appear on your credit report, you might be asked about your BNPL agreements when a new provider does an affordability check. Having more than one BNPL agreement might mean you’re not able to get other types of credit, such as personal loans and goods on hire purchase.

Keeping a record of how much you’ve spent and when your payments are due is vital to avoid extra charges on BNPL agreements, especially if you’ve got more than one.

Some BNPL providers offer you access to your account via their website or an app to help you keep track.

When using BNPL, there are a few things you can do to help make sure you don’t pay more than you need to:

• Look out for notifications from your provider telling you when your next payment is due.
• Make sure you’re able to make payments when they’re due. For example, if you had an unexpected expense, would it make you miss a payment?
• Avoid using BNPL if you’re already in problem debt and get help as soon as you can from a free, impartial debt adviser.
• Set up a Direct Debit or use your debit card to make repayments. Making repayments with a credit card means that you still owe money to the card provider.

If you’re worried about missing payments, setting up a regular Direct Debit will help make sure you keep on track.

If you don’t keep up with your repayments, you can be charged a penalty fee. Make sure you know what the charges are if you miss a payment, as penalties vary between providers.

If you’re still not able to make payments, some BNPL providers will pass your debt on to a debt collection agency. If you’re struggling to pay, it’s important to contact your BNPL provider to explain your situation. Most will try to work with you to find a solution. Look in the terms and conditions section of their website to find out what support is available.