The cost of living is rising. Inflation is at its highest rate for 30 years. And it’s hurting young women, who face historically high housing and living costs. Enter: buy now, pay later (BNPL) – a phenomenon that allows young people to buy things they can’t afford. Thirty-nine percent of R29 readers say they have used a buy now, pay later service. Is this a radical initiative to help young people manage their money and buy what they want (as providers argue) or a way of getting young people into debt by spending frivolously? Refinery29 investigates. In our series Paying For It, this week we will be hearing from the women who use BNPL services.
Twenty-seven-year-old Jessica is a train driver who lives in north Hertfordshire. She earns £85,000 a year and rents a home from her dad which costs £950 a month. After tax she takes home £4,820 a month which, after her rent, leaves her with £3,870 for bills, essentials and anything else she’d like to spend her money on.
By her own admission, Jessica is not a saver. Despite her high and above-average income, she regularly uses buy now, pay later (BNPL) services for luxuries. She first used one of these services, which allow you to pay for goods such as clothes, makeup, homeware and electrical goods in instalments without interest (unless you miss a payment), three years ago.
"My first ever BNPL purchase was a dining table and chairs," Jessica remembers.
Since then, BNPL has become a staple. "I have used BNPL at Currys, Littlewoods, Very and a website called Home Essentials. I will use whichever BNPL company the retailer is offering."
"I am really bad at saving. I've got different accounts for stuff like house deposits and a holiday fund," she explains. "I never want to touch that money to buy other stuff and, obviously, I have a fairly high disposable income but I like to stagger payments when I buy things, that’s why I go for BNPL."
"The good thing about BNPL," continues Jessica, "is that you can spread your payments out. I usually go for the six-month option if I’m buying something expensive. That way, I am paying £100 every month for six months with no interest and it’s not a huge expense for me."
What sort of "expensive" things does Jessica buy? "Most recently it was a Dyson Airwrap and hairdryer combo," she says. These retail for anywhere between £400 and £550. "I didn’t want to pay in one go and sacrifice doing things with my friends and family so I wanted to spread the cost," she adds.
Jessica has no debts beyond BNPL. No credit cards, no loans and no mortgage. She notes that she is careful never to have too many BNPL schemes open at once. "Most credit cards are 0% interest for three months but BNPL is interest-free for three months or six or whatever you sign up for. So, for me, it’s better," she concludes.
I think there is a lot of pressure from social media – and I have felt it myself – to have the latest gadget and this crazy-looking life that you can show everyone.
Jessica might not be very good at saving but she is, she says, "very good" at never missing a BNPL repayment. She keeps all her BNPL plans in a spreadsheet so that she can keep track of repayments and make sure she never misses one.
"I get paid every two weeks and not every month so as soon as I get paid I will pay everything off before I take any money for myself. I open up the spreadsheet, see where I am at, bash out the payments and then don’t worry about it for another few weeks."
All this being said, Jessica’s view of BNPL schemes is not as positive as you might expect. "I think it’s probably a trap," she says. "My job is secure, it’s a job for life. There is no risk of redundancy because people are always going to need to get on a train to go to work but I think BNPL could be harmful to people on lower incomes. It makes shopping seem more affordable than it actually is."
Jessica fears that, for some people, BNPL could go seriously wrong. "If you miss a payment because you forget or lose your job, it could seriously mess up your credit score. If you don’t have money behind you I think it could become a huge problem." A lot of her friends, she notes, have struggled with money in the past.
One of the largest credit rating agencies, TransUnion, has said that it will start including BNPL data in its credit checks later this year. So there could be more repercussions for those who use the schemes excessively or miss repayments.
"I think there is a lot of pressure from social media – and I have felt it myself – to have the latest gadget and this crazy-looking life that you can show everyone. So I can completely imagine people I know using BNPL to purchase something so that they can show it off and then struggling with the repayments."
As things stand, Jessica thinks that BNPL is too accessible. "There are no real checks," she says. "And while I think it’s good in some ways that credit is accessible to everyone, I think it's unfair that BNPL is so widespread but you only know that you could be hit with huge charges if you miss a payment if you read the small print."