How to avoid being trapped by 'Buy-Now-Pay-Later' offers

Tuesday 15th Aug, 2023

What you should know...



Buy-now-pay-later (BNPL) offers a way for consumers to buy goods on credit and pay for them later.  This may be through regular interest-free instalments or after an interest-free period.

BNPL has caught on, especially among younger shoppers and families with tight budgets, who are looking for flexible ways to spread or defer payments. 

This type of finance agreement is not new.  But its wider availability through online and catalogue retailers like Amazon and ASOS, as well as at selected high-street stores, has seen it grow rapidly in the UK since 2000.  Slick advertising campaigns fronted by A-list celebrities have sometimes targeted people via social media who might be less able to afford the terms.

BNPL providers include Klarna, Clearpay and Laybuy.  Some agreements let you pay after a set period of time, while others allow you to pay for your purchases in instalments or ‘slices’. 

While it may give shoppers the chance to grab sale offers when they haven’t the cash available to pay there and then, it’s important to realise that, if you don’t make payments on time, you may incur penalty fees or charges.  It could also affect your credit score.

Research by the Centre for Financial Capability shows that over a third of 18-24 year olds who used BNPL were charged late payment fees, with slightly more for 25-34 year olds.  Which? found that users generally don’t regard BNPL as borrowing and do not believe they might struggle to keep to the agreement.  Worryingly, a survey by Citizens Advice found that 61% of BNPL users who missed a payment or paid late had been refused another product such as a credit card. 

So, how can you avoid being trapped by BNLP and ensure your financial resilience isn’t harmed?   Here’s a few handy tips:

1        Make sure you know what fees could be charged

Charges vary from one provider to another, and depend on your chosen payment method.

Some BNPL agreements are advertised as “interest free”.  Please note that, although you may not be paying any interest, you are still entering into a credit agreement to borrow money. The cost of BNPL comes in the form of late fees.  You should therefore consider whether this is the right option for you, as you could get caught out by expensive fees if you don’t manage to pay on time.

Remember, too, that interest-free products are not currently regulated by the Financial Conduct Authority, so this may affect any rights or protections you have.

2        Keep within your budget

The ease of using BNPL (with minimum spends of just £10 available) makes it very tempting to make lots of purchases now, knowing that payment isn’t due for a while.  It’s therefore very important to set a weekly spending budget and avoid making impulse BNPL purchases that exceed it.  Using a budget planner to help you to understand what you have coming in, going out and left over is a sensible way to manage your money.

3        Do you really need to spend?

A big concern around BNPL is the ability of providers to influence consumers to spend more money on impulse purchases.  As well as racking up extra fees, piling up the amounts you owe could damage your credit rating if you can’t keep your payments on track.

A practical tip when considering a spending decision is to decide whether the product that you have seen is a ‘want’ or a ‘need’.  Thinking carefully about your buying in this way, before you press the Accept button, could help you to save a lot of money.

4        Keep a record of payments

If using BNPL, it’s really important to keep track of how much you’ve paid, how much you still owe, when payments are due, and how many different BNPL agreements you have.

If you have a set date to make repayments, create a reminder on your phone prompting you to pay on the correct day.  Doing this for all your agreements will help you avoid missing payments and late fees.  If you have some spare funds, consider making an early repayment, if your BNPL agreement offers this option.  Alternatively set up a Direct Debit, if your provider allows this.

If you do miss a payment, contact your lender to explain your situation.  It’s important not to take out more credit unless you know that you can afford to pay it back.

5        Put aside a savings buffer, or consider alternative lines of credit

Use your budget to check how much you could save each month.  Even a small amount, saved regularly, soon builds up over time to give a handy buffer to cope with unexpected bills and big spending times like Christmas, family celebrations and holidays.  It could free you to make purchases without needing BNPL and avoid the worry of those late fees. 

If you do need to borrow, remember other types of credit may better allow you to spread the cost over periods to suit you, with flexible payment plans that match the way you receive your income, like our very own Personal Loans, Family Benefit Plan, and Flexi Credit for example.  Some also allow you to build up savings as you repay, making you better off than when your loan started.


This article is for general information only and does not constitute financial, legal, or any other form of advice.



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