Save now, spend later

Date: 28 November 2022

‘Buy now, pay later’ has boomed in popularity in recent years with over 150 companies globally tempting consumers to split or delay payments on everything from takeaways to TVs. And while it may seem an easy, risk-free option, it is a form of debt which can have a negative impact on your longer-term financial wellbeing.

In our latest blog, we’re exploring ‘buy now, pay later’ and looking at healthier options for good money management.


How does ‘buy now, pay later’ work?

‘Buy now, pay later’ – or BNPL – is a payment option offered by third-party companies when you shop online.

The BNPL provider pays for the goods and you pay them back over weeks or months.

Delaying or spreading the cost can be very tempting, so it’s no wonder a reported 1 in 12 UK shoppers have used buy now, pay later services.

BNPL is such an easy way to slip into the habit of “buying” things we can’t afford as almost anything is now accessible at the click of a button. So much so, that it doesn’t feel like “debt” as we know it.

It’s usually presented as interest-free, so it’s an appealing option for many, especially during a cost-of-living crisis and with Christmas fast approaching.


What are the risks of ‘buy now, pay later’?

While it may seem like an innocent short-term financing solution, buy now, pay later comes with serious risks to your financial wellbeing.

Here are some of the major risks of BNPL:

  • Easy to overspend – its seamlessly integrated into the retail purchase and   disconnects you from your money so it can quickly spiral out of control
  • Accessible to all – it’s easy to access no matter what your credit score, which often leads to users accessing and not effectively managing increased level of debt
  • Unregulated – BNPL is not a fully regulated product so you can’t complain to the Financial Ombudsman if things go wrong or use Section 75 refund protection if an item doesn’t arrive
  • Easy to miss repayments – which can incur fees or damage your credit rating
  • Shorter repayment window – with some repayments being every two weeks, consumers often resort to credit cards to repay BNPL building up larger levels of debt.
  • Returns can be difficult – some retailers don’t accept returns if you paid via a BNPL provider, and even if they do it can be complicated dealing with the two separate companies
  • It’s a slippery slope – once you have an account with a BNPL provider, they can offer more and more credit trapping you in a spending cycle.


What are the alternatives to ‘buy now, pay later’?

First of all, ask yourself if the item you’re about to use buy now, pay later services to fund is essential.

Electronics and clothing are popular BNPL purchases, and it’s easy to fall prey to persuasive marketing tactics to access something you can’t afford in a bid to keep up appearances.

Think before you spend: do I really need or just want this purchase? Could I find it second-hand or even manage without it?

If you’ve identified a pressing need for something, like a new washing machine, consider other ways of paying.

GMB Credit Union members can access fast, fair, flexible loans to afford unexpected items without the worry of spiralling debt and unmanageable repayments.

As a responsible lender, we only ever lend what you can afford to pay back, and the affordable interest rates you pay are calculated on your decreasing loan amount, to protect you from falling into financial hardship.


Choose to Save now, spend later

BNPL has quickly become a normalised part of modern online shopping, but it doesn’t have to be your go-to if you’re worried about impacting your financial health especially in these difficult times.

The best way to combat the risks of BNPL is to plan ahead and adopt a “save now, spend later” mindset.

When you take control of your finances, with the support of affordable finance you enjoy the satisfaction of setting and reaching financial goals and providing a brighter future for your loved ones.

Many members use their Credit Union savings to support their planned future spending on major costs such as holidays and Christmas by regularly saving throughout the year.

Your financial well-being is our number one priority, so get in touch if you want to discuss your options before engaging in a spur of the moment retail purchase.

Reach out to us directly for supportive, friendly guidance or use your GMBCU our secure messaging app to chat.

If you’d like to join GMB Credit Union and discover how our resources, savings and affordable loans can help you manage your money better, join us here.