The pandemic has changed how we look at our finances, with many people and families across Northern Ireland negatively impacted.
Our service at Advice NI was already dealing with people who have had to rely credit to buy essential items and we predict this will increase, as many more have to turn to credit to see them through difficult periods caused by the pandemic.
However, it is hugely important to understand credit options before you agree, as debt can escalate quickly, becoming difficult to manage.
Here I’ll outline the downfalls of the tempting but risky credit option Buy Now Pay Later:
With many physical stores closed and all of us spending more time at home, ecommerce activity has risen substantially during lockdown.
Subsequently, ‘Buy Now, Pay Later’ services such as Klarna, Clearpay and PayPal Credit have become increasingly popular.
In a nutshell, these services allow you to purchase an item and pay on a later date. There will usually be an interest free period for you to pay and this will vary depending on the deal being offered.
Whilst this option may be tempting when you’re short of money or in between payslips, there are major downfalls to this form of credit. Firstly, it is your responsibility to remember to pay this and to manually set up the repayment, which can be done in full or monthly instalments. If you don’t pay in full by the delay date you could face high interest charges and in some instances the company may charge you fees.
The interest rate on these schemes is usually in an around 18 to 20 per cent. If you haven’t paid by the end of the interest free period and you miss a payment, your credit score could be negatively affected.
Many of the clients we have supported over the last 12 months haven’t fully read the terms and conditions that they accepted and have suffered the negative consequences of BNPL contracts.
My advice is before considering BNPL products is to make sure you are able to make the repayments before the end of the interest free period.
There is a growing number of people using these to buy products that are more expensive than they can afford. If you can, consider setting a savings goal to purchase special items or you could research to see if there are other more affordable forms of credit available to you.
