Around 14 million people used ‘Buy Now Pay Later’ schemes to make purchases in the six months to January 2023, equivalent to more than a quarter of the UK population, and these numbers could rise as we approach Christmas.


Analysis by the regulator the Financial Conduct Authority (FCA) found that more than one in four people (27%) used Buy Now Pay Later over this period, up from 17% who said they had used it in the preceding 12 months.

As the name suggests, Buy Now Pay Later schemes enable shoppers to buy items and pay for them later, either in instalments or all at once. These types of loans are often particularly tempting because they are interest-free, although if you miss a payment, you’re likely to be hit with penalty charges, and it may also damage your credit score.

Katja Oakley-Bell, financial planning expert at Quilter said: “While Buy Now Pay Later services might present themselves as interest-free alternatives, there can be hidden costs. Late fees, potential impacts on credit scores, and the temptation to spend beyond one's means can lead to unintended financial burdens.”

With many people feeling the pinch due to the cost of living crisis, and with Christmas looming, it’s not surprising that the idea of not having to pay for your purchases there and then might appeal. However, this type of scheme can encourage people to make purchases that they might not be able to afford, and in some cases people may be unable to pay back what they owe.

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Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The best way to protect yourself is by actively challenging any spending through Buy Now Pay Later. If it’s something you need, can afford and you’re completely on top of repayment, then you may want to use it to spread the cost.

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“However, if you’re taking on more debt than you can manage, juggling it with other forms of borrowing, or getting in over your head, there’s a real risk of it doing more harm than good.”

The FCA’s research shows that those who used Buy Now Pay Later regularly were more likely to be in financial difficulty than those who haven’t.

It found that those who have used Buy Now Pay Later 10 times or more were over four times as likely to have missed a bill or debt repayment in three of the last six months. They were also over twice as likely as those who have not used BNPL to also have taken out some form of high-cost credit.


Jackie Spencer, head of money and pensions policy at the Money and Pensions Service, said: “The use of Buy Now, Pay Later is rising and it can be a useful product, but it’s designed for short-term borrowing and needs to be used that way. Some people also take it when they hadn’t intended to and spend more than they’d originally planned because it was available. Like any credit product, it’s vital that you can afford the repayments, have a clear plan to pay it off and don’t take out more than you can manage.”