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Buy Now, Pay Later (BNPL): Is it worth it?

author: Adele Kitchen

By Adele Kitchen

More and more people are turning to Buy Now, Pay Later (BNPL) to finance the things they need. 

23% of adults have used this type of credit in the past year, according to TransUnion. It's not risk-free, though. We walk you through the pros and cons to help you decide if it could be right for you. 

This article focuses on short-term, unregulated BNPL products, not longer-term financing. It’s not intended as financial advice. 

Buy Now, Pay Later is credit 

Buy Now, Pay Later is a type of short-term credit that can help you spread the cost of a purchase. The main UK providers include Clearpay, Klarna, Laybuy, and PayPal. 

You typically apply for BNPL during online checkout and find out if you’ve been accepted straight away. Usually, you’ll need to make a partial payment upfront, followed by fixed instalments. Each time you want to use BNPL to make a purchase, you’ll need to make a new application, even if you’ve used the provider before. 

BNPL can be helpful if you spend responsibly, but it does come with some risks. Let’s look in more detail. 

Advantages of Buy Now, Pay Later 

Spread the cost of your purchases 

Buy Now, Pay Later enables you to buy something without having to pay for it all at once. This could help you deal with situations where you need something now but can’t afford to pay for it upfront. 

You can spread the cost over several instalments. These could be weekly, fortnightly, or monthly, depending on the option you choose and the terms and conditions. Some BNPL providers also give you the option to pay the full amount after a set period (e.g., after 30 days). 

Applying doesn’t affect your credit score 

Most BNPL providers only run a soft credit check on your credit report when you apply. These won’t be visible to other lenders on your credit file and won’t affect your credit score.  

One exception to this is Laybuy, who runs a hard credit check. Other lenders will be able to see this, and it will affect your credit score. It’s best to check the terms and conditions to be on the safe side if you’re unsure. 

It can be interest-free 

You won’t have to pay any interest or fees if you always pay on time. 

Disadvantages of Buy Now, Pay Later 

It can be tricky to manage multiple repayments 

If you’re not careful to keep track of your BNPL borrowing and repayments yourself, they could become difficult to manage. There are two reasons for this: 

  1. Providers may not carry out robust affordability checks. BNPL providers aren’t regulated by the FCA. This means they’re not required to carry out affordability checks (although many do). So, they could allow you to borrow more than you can afford to repay. 
  2. Each BNPL purchase comes with a new credit agreement. You may need to monitor several accounts and agreements. This can make it tricky to keep track of what you owe. 

Missed payments can damage your credit score 

Most BNPL providers report to at least one credit reference agency (CRA). So, if you miss a payment, it's likely that it will show up on your credit report. Missing payments can affect your eligibility for other types of credit. As a result, you may find that you can borrow less or face higher interest rates in the future.  

Late fees and interest may apply  

BNPL payments are usually taken automatically from your chosen card. So, if you don’t have funds available, you risk going into your overdraft to make a payment. This could lead to interest and charges. 

If your payment to a BNPL provider fails, you may be charged a late payment fee. And interest might become payable on what you owe. Late fees are typically around £5 or £6 per missed payment, depending on the BNPL provider’s terms and conditions.  

The following maximum fee caps apply per purchase: 

  • £10 with Klarna 
  • £24 with Laybuy 
  • With Clearpay, it’s £6 for orders under £24. For purchases over £24, it’s the lower of £24 or 25% of the order value. 

Note: PayPal doesn’t charge late fees when you use Pay in 3. 

Refunds can be slow 

It can take longer to get a refund if you need to return something you bought using Buy Now, Pay Later. The money needs to be sent from the retailer to the BNPL provider before it can be returned to you.  

You will need to continue paying the instalments in the meantime. If you stop making payments early, you could face interest and charges, and your credit report may be affected. 

If something goes wrong, it’s harder to get help 

Many BNPL providers aren’t regulated by the FCA. So, you won't usually be able to escalate a complaint to The Financial Ombudsman Service.  

And, if there's a problem with your purchase, you can't use Section 75 of the Consumer Credit Act to get a refund.  

Instead, your options are: 

  • Checking what protection your BNPL provider offers under their own policies
  • Raising a dispute with the retailer
  • Asking your bank to make a chargeback request. 

Alternatives to Buy Now, Pay Later 

The most suitable option for you depends on your individual circumstances. Here are some alternatives to think about: 

Paying upfront 

We know it’s not always possible, but the best alternative to BNPL is to save or budget for purchases and pay upfront. That way, you avoid borrowing and won’t incur any interest or charges at all. 

0% overdraft 

If you’re looking to borrow a small amount, you could consider using an interest-free overdraft. The bank will either do a hard or soft credit check upon application to see if you’re eligible.  

Remember to manage your overdraft responsibly to avoid markers on your credit report and any interest and charges. 

Credit card 

The benefits of a credit card over a short-term BNPL service are: 

  • You could borrow more with a credit card (if needed and depending on your eligibility).
  • You have one account and one credit limit, so it’s easier to track what you owe.
  • They are regulated, so you are well protected if something goes wrong.
  • You have consumer protection under Section 75 for purchases between £100 and £30,000. 

    However, there are some downsides to consider: 

    • Unlike most short-term BNPL providers, credit card lenders will run a hard check on application. Other lenders will be able to see this. 
    • You may need to wait for the card to arrive, whereas BNPL is instantly available when you checkout online.  
    • Interest will usually apply unless you pay in full every month. With short-term BNPL, you won’t pay any interest if you make your instalments on time.  

    Also, bear in mind that late fees may apply if you miss the minimum monthly repayments. Missed payments will affect your credit score. 

    Longer-term BNPL finance 

    If you need to buy something more expensive and spread the cost over a longer period, you could consider longer-term BNPL finance.  

    Like credit cards, this type of finance is regulated, and lenders carry out a hard credit check when you apply. However, you won’t be protected by Section 75. But, you could ask your bank for a chargeback if something goes wrong and you’re finding it difficult to get a refund. 

    Be aware that interest and charges may apply. Missed monthly repayments will affect your credit score and may lead to late fees. Check the terms and conditions before you decide whether to apply, as they differ between providers. 

    Check out our blog on all the ways to pay for alternatives to Buy Now, Pay Later. 



    Disclaimer: We make every effort to ensure that content is correct at the time of publication. Please note that information published on this website does not constitute financial advice, and we aren’t responsible for the content of any external sites.

    Author Profile Image: Adele Kitchen

    Adele Kitchen

    Personal Finance Writer

    Adele is a personal finance writer with more than 10 years in the finance industry behind her. She writes clear and engaging guides on all things loans for Ocean, as well as contributing blogs to help people understand their options when it comes to money.

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