Should I use Buy Now Pay Later if I can’t afford Christmas shopping?

Gráinne Griffin, director of communications at the Competition and Consumer Protection Commission. CCPC. Writing in The today; Sunday November 27 2022 10:23 AM
Q I’m planning on starting my Christmas shopping soon and I don’t have a huge amount of money to spend this year due to the cost of living. Some of my friends have said that instead of paying for presents up front, they’re going to use a form of credit that will spread out payments for their Christmas shopping over time. That sounds appealing to me. What type of credit are they referring to and how does it work?
Maria, Co Limerick.
A Firstly, it would be a good idea to make a list of what you’d like to buy for Christmas and what each item costs. Then set a realistic budget of how much you can afford to spend. This will also allow you to decide if you need to change your shopping list to ensure you stick to your budget.
Ideally, you would use any savings you have to pay for your Christmas shopping. This won’t cost you anything in interest and you can build your savings back up in the New Year. However, if this is not an option, it’s important to determine what type of credit best suits your needs and offers you the best value. There are several credit options available, including getting a personal loan from your bank or credit union, using an overdraft, or using a credit card. The interest rate and fees charged on these different credit options vary, so look at which option represents the best value for you. The CCPC has a comparison tool on its website to help you compare the cost of these products.
Its sounds like the credit option being discussed by your friends is Buy Now Pay Later (BNPL), which allows consumers to buy goods or services and spread the cost over a number of months or years as opposed to paying up front in one go. There are a number of different providers in Ireland, including relatively new entrants with phone apps, and fees and charges will vary from one provider to another and depend on how you make your repayments.
While paying in instalments over the short term may be interest free, longer-term arrangements and missed payments can lead to fees and interest rate charges. Missed payments can affect your credit rating, which can have an impact on your ability to secure loans or credit in the future. Also keep in mind that if you have an outstanding debt with a Buy Now Pay Later provider, the provider can refer it to a debt collection agency that would then pursue you to repay the debt.
While Buy Now Pay Later credit may seem like an easy fix in the short run, you’ll need to bear in mind the following factors if you are planning on buying several Christmas presents: if the provider charges late fee payments, how much are they? Can you keep track of how much you owe the provider? Can you keep track of your repayment dates?
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