A simple click can make your shopping dreams an interest-free reality, thanks to 'buy now, pay later' credit options. Yet there is more to this convenient new online shopping addition.

A simple click can make your shopping dreams an interest-free reality, thanks to ‘buy now, pay later’ credit options.

Yet there is more to this convenient new online shopping addition.

Dangers of ‘buy now, pay later’

Payment solution organisations such as Klarna, Laybuy and ClearPay provide the answer to those who cannot wait until payday. They allow customers to delay or split payments into feasible chunks without added interest. While this offer is tempting to those trying to manage their money, it can have dangerous consequences.

The Financial Times warns that ‘buy now, pay later’ options can actually promote consumerism and mindless spending, as companies like Klarna market themselves to retailers with the promise of increasing sales by 20%. Possibly because those on a budget are no longer restricted to wait until payday and can spend all at once.

Gary Rohloff, co-founder of Laybuy told the BBC that the simple ‘buy now, pay later’ scheme can persuade people into spending more money than they would otherwise. This is potentially why retailers like ASOS, Urban Outfitters and Pretty-Little-Thing are adopting this payment option.

What are the positives?

Credit options can benefit people on a budget who need necessities but lack the funds. It allows them to purchase things such as winter coats and school uniforms. Payment methods like Laybuy, ClearPay and Klarna give you the instore experience of trying before you buy, so you don’t have to commit to purchasing before you have the product in hand.

A purchased product can be returned without any money transactions taking place. This means that customers do not have to wait 3-5 working days to get their money back.

How does ‘buy now, pay later’ impact the general public?

Klarna, Laybuy and ClearPay all confirmed to the BBC that 2019 has been their most successful year yet in the UK. What they fail to mention is the effect overdue payments can have on your credit score. 

In a survey carried out by Compare the Market, 39% of 25-34-year olds stated that the use of delayed payment schemes has tarnished their credit score. While Klarna says that their ‘buy now, pay later’ service has never impacted anyone’s credit score, the ease of shopping without the instant withdrawal of money can lead to a spiral of debt for consumers.

ClearPay and Laybuy, on the other hand, can get credit companies involved in instances of late repayment.

Many young people blindly turn to credit companies as a way to obtain quick, interest-free loans. However, they are unaware that a poor credit score can ruin their chances of attaining future landmarks. It can even have an impact on their ability to successfully apply for a mortgage. 

Credit check companies, like ClearScore, advise consumers to think before they use ‘buy now, pay later’ options, especially if they think they will struggle with repayments.

Consumers need to be well informed of the potential risks and be responsible with credit payment options. Only then do firms like Klarna, ClearPay and Laybuy become useful tools.