The Buy Now, pay later concept has proven incredibly appealing to consumers. Unfortunately, it also makes them go into debt even further. Borrowing money to make repayments on BNPL is not the way to go and will spark another credit crisis unless things improve.
BNPL And The Looming Credit Crisis
Being able to purchase goods and not having to pay the full amount at checkout is very appealing. It makes it easier for consumers to spread payments and worry less about making large purchases. That mindset also means people will often buy things they do not need as they can “worry about it later”. However, all of those BNPL payments can still add up to significant amounts if one isn’t careful.
Through Buy Now, Pay Later, consumers can find themselves in the position of having to borrow money to make repayments. That often includes overdrafts, borrowing from friends or family, and even payday loans. However, consumers will sign up for extra credit cards to cover the costs, creating a bigger sinkhole of funds.
Citizens Advice Chief Executive Dame Clare Moriarty Adds:
“Shoppers are piling borrowing on top of borrowing, and sinking into ever more desperate situations that can feel impossible to escape from. The spiral of debt from buy now, pay later to credit cards, loans, and even payday lenders shows it’s not a risk-free alternative. buy now, pay later is part of the credit industry and must urgently be regulated as such.”
The appeal of BNPL primarily sways the minds of younger shoppers. That is also the most vulnerable demographic for repayments; over 1 in 2 had to borrow money to pay off their debt. Things gradually improve for 35-54-year-olds, although one in three still struggled to pay on time. Those over 55 years old find themselves in less trouble, although 24% still have to source cash elsewhere.