This isn’t a full fact find, MoneyNerd doesn’t give advice. We work with The Debt Advice Service who provide information about your options.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
For free & impartial money advice you can visit MoneyHelper. We work with The Debt Advice Service who provide information about your options. This isn’t a full fact-find, some debt solutions may not be suitable in all circumstances, ongoing fees might apply & your credit rating may be affected.
In this guide, we focus on the fast-growing Buy Now Pay Later (BNPL) payment method in the UK. If you’re trying to handle a BNPL debt, you may have some questions and worries.
You’re not alone. Each month, over 170,000 people visit our website seeking advice on debt solutions.
This guide will explain the following:
The key points about BNPL
How to handle BNPL debt
The effect of BNPL on your credit score
The role of BNPL in retail
Where to find expert help
If you’re feeling stressed about not being able to pay a BNPL debt or worried about late or missed payments, we understand. This guide is designed to provide clear advice and to help you find a way forward.
Let’s start exploring the world of BNPL.
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A selection of different buy now pay later apps are available for shoppers to use. Some of the most popular apps are Klarna, Clearpay, Affirm, Sezzle, Afterpay and Perpay.
There were nearly 10 million BNPL app downloads in the first half of 2022.
In September 2022, Klarna was downloaded 194,388 times in the UK – this is the most popular BNPL company in the country.
In 2019, Klarna had less than 20,000 monthly users. This figure grew to approximately 970,000 by September 2021.
In 2022, there was a 59% increase in retailers accepting Klarna.
In 2021, Klarna was used by 150 million customers worldwide.
In 2022, the global BNPL market was worth $179.5 billion.
A recent report has shown that over two-thirds of retailers in the UK in 2022 reported an improvement in their sales when they offered buy now pay later schemes.
However, more than half of retailers surveyed said that they would not be offering buy now pay later as a payment method. This is probably due to this payment method not being relevant to the services that the retailer provides.
However, this reluctance could also be due to the financial trouble customers will face if they miss any instalments. From my experience, this can quickly lead to a horrendous debt spiral. The type of credit that buy now pay later offers can also open up businesses to unnecessary credit risk.
Who is using buy now pay later?
Research shows that younger generations are the most likely to use buy now pay later when shopping.
Millennials are the most likely to use BNPL, with 54% of this group having used this payment method.
50% of Gen Z use BNPL.
23% of baby boomers use BNPL.
52% of BNPL shoppers use money from their current account to pay back the money.
51% of 18-34-year-olds have borrowed money to pay back a BNPL loan.
22% of all BNPL users live in the United States.
66% of people believe it’s ‘financially risky’ to use BNPL services.
Sweden has the largest market share in the BNPL market.
66% of people believe it’s ‘financially risky’ to use BNPL services.
Shopping Habits and Trends
Increasing numbers of online retailers accepting buy now pay later payments, meaning it’s possible to use this type of credit to buy almost anything.
33% of BNPL consumers use this service to buy casual wear clothing.
31% of BNPL consumers use this service to pay for meals out.
26% of BNPL consumers use this service to buy beauty products.
22% of BNPL consumers use this service to pay for technology.
19% of BNPL consumers use this service to pay for travel.
19% of BNPL consumers use this service to pay for home improvement.
14% of BNPL consumers use this service to pay for their rent.
29% of BNPL consumers use this service at least once a month.
80% of BNPL consumers use this service at least once every six months.
The average user is currently paying for 3.8 items.
38% of consumers believe BNPL will eventually replace their credit cards.
The average BNPL user repays between $101 and $205 every month.
The average amount owed by BNPL users is $883.
The average cost of a purchase paid for with BNPL is $689.
Ease and convenience is the most popular reason for using BNPL, followed closely by the ability to spread costs over time.
39% of BNPL users say the main reason they use this option is because the credit is interest-free.
30% of BNPL users say the main reason they use this option is to make purchases they otherwise couldn’t afford.
Can buy now pay later affect my credit score?
Yes, buy now pay later can affect your credit score.
Lenders or creditors use your credit report to determine if you are a ‘high-risk’ customer – someone who is likely to have difficulty paying their bills on time. If you miss some BNPL payments and your account gets sent to a debt collector, this will be flagged.
Understandably, a credit company will be reluctant to give you credit.
Lots of BNPL credit and borrowing can also be looked at negatively because it can suggest that you are living beyond your means.
However, if you are careful with your money, you might be able to use BNPL to build up some positive credit history. BNPL companies now share their information with credit reference agencies, which means that lenders can see this information on your report.
Evidence that you have stuck to your original agreement and other positive credit history interactions look good to new lenders. This can make it easier for you to get better credit rates in the future.
Where can I get professional advice?
If you are worried about your BNPL habits or just struggling to manage your money, I recommend speaking to a debt charity.
There are several charities and organisations in the UK that offer free debt counselling services and free financial advice. Their advisors will be able to walk you through your options and find the best solution for you.
In the UK, Klarna is the most popular BNPL app, followed by Clearpay. 61% of all BNPL users have purchased an item with Klarna or Clearpay.
Do buy now, pay later do credit checks?
Buy now pay later providers may do a credit check before approving your application. If you have a bad credit score, then it’s unlikely you’ll be approved for BNPL.
Can using buy now pay later harm your credit score?
Buy now pay later can harm your credit score if not used responsibly. However, if you make all of your payments on time, then this will not be a problem.
What happens if I miss a buy now pay later payment?
If you miss a scheduled payment then you’ll generally incur a late payment fee. A missed payment can also be harmful to your credit score.
If you reach the end of your agreed repayment period and you still have an outstanding balance, then you may be required to pay a settlement fee or have a lump sum of interest added to the debt.
MoneyNerd’s founder, Scott Nelson, has a decade of financial industry experience, including 6 years in FCA regulated loan and credit card companies. Troubled by a lack of conscience in the industry, he founded MoneyNerd to give genuine advice to those in debt and struggling financially.
Janine Marsh is an award-winning presenter and a valuable member of the MoneyNerd team. With a wealth of experience as a financial expert, she's been featured on BBC Radio 4, BBC Local Radio, and BBC Five Live, and is a regular on Co-op Radio.
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