As the BNPL sector continues to grow, a recent study by NerdWallet revealed that 78% of Brits are relatively unaware of the risks involved in the alternative payment journey, specifically, the potential impact of missing payments, when it comes to credit agreement and financial care.
The data lands at a time when usage of BNPL schemes is growing and the debate around their responsibility intensifies. The issue has split the nation: 43% of survey respondents regarded these schemes as risky, while 47% saw them as a safe way to spend.
Denise Ko Genovese, Senior Editor at NerdWallet, commented on the findings: “Used responsibly, Buy Now, Pay Later schemes can help consumers to spread the cost of their online shopping. However, they can have a huge impact on your credit score if you are not careful. It can be tempting to skip past lengthy T&Cs, but shoppers should be aware of the potential charges and other repercussions that may come their way when payments are missed.
“We should all be wary of being enticed by the ease of deferred payments on non-essential items. The idea of not having to pay off your £200 online spending spree until next year can be tempting but it is important to remember that the reason you’ve deferred payment is probably because you can’t afford it right now. So will you really be able to pay it off in 12 months’ time?”
NerdWallet’s Consumer Borrowing Index is a nationally representative survey that investigated attitudes towards spending and borrowing among 5,000 adults living in the UK.
These findings are even more pertinent considering the growing popularity of BNPL. Three in 10 of the shoppers surveyed had used schemes, such as Klarna and Afterpay, making BNPL the second most popular form of credit among those surveyed.
Even though a majority felt safe when using BNPL schemes, alarmingly, over half (51%) admitted to not always reading the T&Cs, which NerdWallet discovered takes an average of 36 minutes to read through. Ironically, nine in 10 agreed that it is important to fully understand the T&Cs of a credit or loan product before using it.