Debt warning as Buy Now Pay Later surges by £1bn

SHOPPERS face a new year debt crisis after the use of Buy Now Pay Later schemes surged by £1billion at Christmas.

As a result, total festive spending using the method, which lets consumers pay for products in instalments, has been put at £3.3billion by financial planning experts Credit Karma. It said this is 43 per cent higher than last year with more than half of shoppers viewing it as ‘easy credit’.

Research by consumer group Which? suggests many users do not understand the consequences of missing repayments.

These can include penalty fees, a black mark on their credit record and being referred to a debt collector. A growing number of retailers now offer sales through the scheme, including Harrods and Guess.

According to Credit Karma’s study, nearly half of those struggling to manage their Buy Now Pay Later debt have seen their credit rating drop. Ziad El Baba, of the company, said: ‘[The scheme] becomes problematic when consumers borrow more than they’re able to comfortably pay back.’