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Is ″Buy Now, Pay Later″ the consumer credit magic bullet we’ve all been waiting for?

BIScom Subsection: 
Author: 
Nigel Morris-Cotterill

Buy Now, Pay Later is a rapidly growing consumer credit sector. Last year, it is reported, it was used in 3.6% of retail sales in the UK. Is it a panacea or a plague?

Long Read: 17 pages.

If it's so good, why is Buy Now, Pay Later criticised?

Given all of the above, especially that it appears to pick the best parts of so many credit options, why is there so much criticism of the sector?

In part it’s due to a lack of understanding of what Buy Now Pay Later is: it is not short term, payday lending although consumers might use it as such.

But the terms upon which different lenders trade are very dissimilar.

Usually, but not always, there is no arrangement or application fee.

Often, but not always, there no interest on accounts that are settled on time.

Sometimes, but not always, there are no late payment fees. But fees are not the same as interest so users must be careful to note whether a ″no late fee″ company applies interest on overdue accounts.

There is much made of the no interest point: some short term payday lenders charge rates exceeding 1,000% per annum. I have seen one company advertising rates exceeding 1,400% APR. It is staggering that these advertise heavily during daytime TV and late at night – along with all manner of dodgy schemes filling in forms that are available free and for referral schemes for personal injury lawyers or, at least, that is the experience in the UK.

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