Updated: Apr 20, 2020
Clear pay and Klarna are just two of the organisations offering buy now and pay it later.
Let’s paint the picture.
You’ve seen a top on ASOS that you really like, you don’t have to wait until payday to get the item, you can order it now and pay up to 30 days later. I bet you’re thinking ‘hmm this sounds good -what’s the catch?'
We expect the buy now pay later trend to take off in 2020, so we’ve listed the main pros and cons (because no-one is going to read the small print).
Only Pay For What You Keep
Raise your hand if you’re browsing on ASOS and within minutes there are 101 things in your basket . We’re glad it’s not just us. Whilst we don’t promote this behaviour, but if you stack up a hefty amount of items, you can get them delivered, try them on and return any they don’t like, only paying for what they keep - saving the hassle and waiting for money to be credited back into your account.
You order more than you afford
In theory, it’s great.
In reality, as the money you checkout with is, isn’t *really* yours you feel like you can spend more of it than you can afford.
If you don’t pay, your credit may suffer.
Whilst the words ‘credit check’ aren’t referenced to on either sites, they perform a “quotation search” with an external credit reference agency. And, if you don’t pay after the 30 days is up, your details could be passed to a debt collection agency.
Interest on purchases
Another bonus is that you are also able to split payments over a number of months.
The representative APR (annual percentage rate) on the purchases split over a few months is 18.9% — similar to the interest charged on many store cards or credit cards. On top of that, a one-off fee of between 2 – 8% is charged up front to spread payments over six to 24 months. Where the downside is, if you made the purchase in one, no interest would be charged.