Black Friday is almost here— November 28, 2024, to be exact. UK consumers can expect to be treated to an immense shopping experience! Its predictions from PwC UK forecast a spend of about £6.4 billion by shoppers this year. This total just edges ahead of last year’s spending of £6.3 billion. Consumer enthusiasm is definitely increasing. Yet debt charities are sounding alarm bells about how the growth of Buy Now Pay Later (BNPL) schemes may be increasing that temptation and putting people at risk of falling into further debt.
Over a third of Britons plan to rely on BNPL to fund their Black Friday purchases. This payment method has evolved from a quirky alternative to a quick and convenient solution. People are more easily able to swoop in and snag the newest deals they’re looking for. Although BNPL can be convenient, it has the potential to cause significant financial harm. As of the second quarter of 2024, over 3 million household customers within the UK were behind on their overdue payments. All of these people probably faced predatory harassment from creditors.
The way that BNPL is usually set up, consumers can pay for their purchase in three or four installments. As long as they stick to their repayment plan, they usually do not pay interest or other fees. This convenience can create a heavy financial burden.
Sabrina McCullough from Money Wellness highlighted the dangers of this payment method: “Juggling multiple BNPL payments alongside rent, bills and other debts can quickly become overwhelming.” She said that having several lines of BNPL credit that all have different payment dates can complicate budgeting. This premium situation creates additional accounts of payment default risk.
The UK’s BNPL market is primarily dominated by three major brands: Klarna, Clearpay, and PayPal. Since their inception, these companies have leveraged this trend to provide consumers with an attractive formula for reinvigorating their shopping habits. It’s important to remember that BNPL is credit in disguise and experts warn it should be used responsibly.
Jane Parsons from Citizens Advice makes it clear why BNPL is alluring. It does provide a fast track for shoppers looking to catch the best deals of the day. She stressed that consumers should be aware of their budget constraints heading into the holiday shopping season.
Consumers are already getting ready for Black Friday and Cyber Monday, which falls on December 1 this year. The danger of overspending is extremely great. Holiday shopping creates a sense of urgency, pushing shoppers to make rash choices. They fail to account for the long-term impact on their own budgets. BNPL promises instant pleasure, a financial risk experts caution against. If you don’t manage it the right way, it can take a crippling toll on your finances.
In recent years, the BNPL industry has faced growing political and regulatory pressures over consumer protection. Some users are still at risk of not realizing the dangers of falling behind on payments and piling up debt. Consumer finance advocates are understandably concerned about the gaping hole in regulatory oversight in this industry. They have two recommendations for consumers—first, do your homework before selecting a payment plan of any kind.