Yahoo Finance Brits facing up to £2.3bn 'buy-now pay-later' Christmas bills
Brits facing up to £2.3bn ($3.1bn) in bills for Christmas shopping bought on “buy-now pay-later” schemes, according to new research by Credit Karma.
One in four people (26%) used buy-now pay-later services to fund Christmas in 2020, the research found.
Buy-now pay-later scheme users now face an average bill of £170. With Brits spending an average £438 on their Christmas shopping, this amounts to nearly 40% of their total Christmas spending.
Younger generations were more likely to utilise buy-now pay-later scheme with nearly half (46%) of 18- to 35-year-olds relying on this method to fund their festive spending.
Men were also more likely to have used buy-now pay-later, with 33% of men using these services for their Christmas shopping, compared to 20% of women, according to the research.
Those living in the South East used buy-now pay-later the most this Christmas, with 36% opting for this payment method. Those in the North East of England and London also used this payment route more than average, with 35% and 33% going to buy-now pay-later, compared to an average of 26% across the UK.
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Credit Karma warned consumers that “unlike regulated methods of borrowing, buy-now pay-later products don’t benefit the borrower’s credit score for paying back debt within the interest free period (usually 30 days). This means consumers who rely more heavily on these schemes than regulated agreements might struggle to prove to financial institutions that they are responsible borrowers when it comes to longer term lending like personal loans, mortgages or car finance.”
Akansha Nath, head of partnerships at Credit Karma, said: “Buy now, pay later schemes have seen a meteoric rise, but in doing so have attracted attention for being unregulated and potentially risky for consumers who don’t fully understand how the schemes work.
“At Credit Karma, we believe people should be rewarded for the sensible management of borrowing, as this helps them make financial progress towards important things like mortgages or competitively-priced car finance. Until this changes, borrowers are risking debt without any credit given for handling it.”
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