Will you be using Buy Now, Pay Later this Christmas?
SmartPurse - Fun, Financial Education for you and your workforce
We make finances fun, and accessible for all! Corporate Workshops ● Employee Perks ●Smartpurse App ● Coaching ● Events
In the run-up to Christmas, you may be thinking about the rising cost of living and how to spend money wisely. Some people may be concerned that what they currently have available for the holiday season may not be enough and are considering how best to spread the costs. Do you turn to loans or Buy Now, Pay Later schemes?
There are many factors to consider when it comes to taking on debt, not least the question of repayment. Let’s go through the basics of Buy Now, Pay Later to see if the ‘convenience’ of having the extra money is really worth it.
What is Buy Now, Pay Later?
Usually, when we buy an item from a store, we pay in full to take that item away. With a Buy Now, Pay Later scheme, you essentially get the item now but pay for it at a future date. You owe the money to the seller/store or a third-party Buy Now, Pay Later provider. You then pay the debt off in instalments or as a lump sum in the future. It is similar to traditional loan repayment.
These schemes are not usually subject to extensive credit checks, so if your credit score is not the best, this option might be the right one. But this is only if you will be able to actually pay for it in the long term.
The main players are PayPal Pay in 3, Clearpay, Klarna and Laybuy, and they all have their own specific terms and conditions.
What to look out for if you choose to Buy Now, Pay Later?
Most people use this scheme for big-ticket items or occasions that cost more, such as birthdays or Christmas. It’s important to make wise decisions when looking for the best offer.
Here are our tips for finding the suitable scheme for you:
???Always, always, consider this before you think about any Buy Now, Pay Later scheme: can you afford to pay it back? Yes, schemes are designed for customers who can’t afford to pay in one lump sum, but can you afford to pay for it on the terms you will sign up for? Think of it this way – a product price is ￡500, so you are signing up for 12 monthly interest-free instalments to pay it back. That works out to ￡41.66 per month for a year. That’s what you have to calculate – can you consistently pay that back? And if you want to buy something that is ￡1,000? You will be paying ￡83.33 each month. And that’s to pay back the money on an interest-free basis. If you miss payments and are charged interest, or your agreement includes interest, these amounts will be more significant.
???Before you take advantage of a Buy Now, Pay Later offer, take into account whether you have any others running. It is all too easy to click the button to spread the payment but once you have two, three or four on the go, with payments going out at different times in the month, it is easy to lose track.
???Don’t skip over the Terms and Conditions. We know, they’re so dry and dull, but you must know exactly what you’re signing up for. There may be hidden clauses in the small print, so take your time to read through everything. Don’t be pressured into signing if you’re unsure of anything – always ask.?In particular, make sure you know what happens if you miss a payment. Buy Now Pay Later tends to be ‘interest free’ but only if you pay on time. Miss a payment and there are often fees and interest on the debt that is well above average.
???Remember that your purchases are not necessarily protected if you use one of these schemes. Section 75 of the Consumer Credit Act states that a credit card company is responsible for purchases between ￡100 and ￡30,000 that may be faulty or misrepresented by the retailer. However, Buy Now, Pay Later schemes are not obliged to sign up to Section 75, so consider whether using a credit card would be safer, especially if your purchase is significant.
???There are also?other?interest-free schemes available, including some store cards. Being accepted for credit on this basis will depend on your credit rating, so don’t assume you will automatically be eligible. Be aware also that they’re not exactly ‘free’. A monthly interest charge may be applied depending on the amount borrowed and the repayment period offered.
???Talking of interest rates, don’t forget to factor in rising interest rates in the current market.Looking for interest-free schemes or alternatives such as loans or credit cards may be worth considering too.
Where did the government’s autumn statement leave us?
Last month, the Chancellor Jeremy Hunt announced his plans to help the UK rebuild the economy and tackle the?cost of living crisis.
They have given themselves five years to meet debt and spending targets. Here are the main points for households:
And for businesses, the main points are:
SmartPurse in the news
On the topic of Buy Now Pay Later, SmartPurse have been opening up the debate about its use with?sustainable brands, with Olga Miler giving her view in a recent Stylist?article.
There is no doubt that shopping ethically comes with a price tag. Whether you want your fabrics to be organic, need to be sure those who made them were fairly paid or need to make sure your fashion?sense is still protecting the planet, the production and retail costs mean they can’t compete with the typical high-street fashion shops.
Buy Now Pay Later might be a way to make these sustainable fashions accessible, but does it drive up consumerism? And is it generating more debt by trapping people into more repayment schemes?than they can manage? You can read the full article?here.
Figure of the Week
领英推荐
Average Buy Now, Pay Later debt in UK is ￡244.37 per capita
Payments on a Buy Now, Pay Later scheme are deferred, usually from between a month and a year. If you can’t choose an interest-free scheme this will mean that as soon as you take out the loan you will be paying monthly interest on the full amount - whether you start to pay it back straight away or not.
Make sure you do the research: not just on the best scheme for you, but also on your ability to pay the money back with as little interest as possible.?To find out how much you will pay on a loan that you defer, go to?omni calculator.
Festive Challenge!
In the run-up to Christmas, we’re setting ourselves some festive challenges here at SmartPurse HQ. We’d love it if you joined us! We’re all about taking the pressure off at Christmas, and this week our strategy includes visiting charity, vintage, and thrift shops for seasonal bargains.
These are great places to find preloved gift items at a fraction of the price of high street shops. They are especially good for those on your Christmas list who like second-hand and vintage items. Trawling the charity shops in your area can save you a pretty penny and give your loved ones a one-off gift they may not find elsewhere.
We also love a homemade gift at SmartPurse. What skills can you and your family use over the holiday season? Are you a baker, crafter, or knitter?
Most people prefer a handmade gift made with love over a hastily-bought item they might not want or use. Consumables are especially great for the minimalists in your life who don’t want any more trinkets they’ll have to give house space to!
Post the images of your creative money-saving ideas on Instagram and tag them?#smartpurseXmas?to inspire others.
Money School is free until 31st January!
That’s right!?Sign up now?and get two?months of step-by-step guides to help you build financial confidence with up-to-date resources.
Use code?SMARTMONEY23?at the checkout to start taking control of your finances today! That’s it: no strings attached and hoops to jump through.?
*To learn within the app, register on the web first and then log in through the app.
Meet the expert – Isabel Clark
Isabel hails from the spa city of Bath in the UK and is passionate about making a difference in the world, both for people and the environment. She has been a financial advisor for over a decade and can advise on house purchases, mortgages, and investments.
She is particularly interested in helping her clients make a more sustainable impact with their money.
"I am passionate about helping you put a financial plan in place that fits with your beliefs and values."
Money Inspiration?@smart.purse?
We love hearing from you. Send us your comments and feedback to:?
Always remember to consult an independent financial advisor for personalised investment advice.
Pass it on
?? Spread the word - share this newsletter with your friends!
?? Follow us on LinkedIn, Instagram or Facebook
???Ideas and suggestions? Write to us: [email protected]
???Do you want to receive the German newsletter instead?
?? Also reach out to [email protected]