The amount of Christmas shopping put on buy-now, pay-later rose by £1billion in 2021.
As banks, retailers and others continue to jump on the increasing popularity of the BNPL payment method, Britons racked up £3.3bn in Christmas debts, with two in five (42%) yet to repay them in full.
A study conducted by smart money platform, Credit Karma, highlights a growing debt bubble amongst buy-now, pay-later customers, as one in 10 (11%) users admit that they’ve missed repayments, and a similar number expect to fall behind.
Failing to keep up with payments could pose a risk to consumers’ credit scores. According to the study, nearly half of those struggling to manage buy-now, pay-later debt have already seen their credit rating drop, which can make securing personal loans, mortgages, credit cards and even mobile phone contacts less accessible or more expensive in the future.
Despite the budgeting issues they can create, the payment plans are considered easier to access than credit cards and personal loans. This can be seen in the number of successful applications made: with one in three consumers (31%) using the service over Christmas alone.
As the buy-now, pay-later industry awaits further government regulation, the free credit report provider is urging caution amongst consumers.
Ziad El Baba, General Manager at Credit Karma, said: “Spreading out payments can be helpful in certain circumstances, however it becomes problematic when consumers borrow more than they’re able to comfortably pay back. Plus, most buy now, pay later companies don’t report to the credit bureaus, which leaves many buy-now, pay-later customers at a disadvantage. This is especially true for responsible borrowers who won’t likely see their credit scores improve as a result of making regular, on time repayments, as they would with other forms of borrowing.”