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Buy now pay later: what you need to know

Buy now pay later (BNPL) lets you spread the cost of a purchase interest-free. It has grown in popularity, but what should you look out for?

Before choosing a BNPL option, you should understand how it works and what to consider.

How does BNPL work?

A BNPL agreement means you can shop for things and delay paying for them.

There are generally 3 ways of paying:

Pay later: there’s usually an interest-free period between 14 and 30 days. But if you fail to pay on time, it can become expensive due to late payment fees.

Pay in instalments: you pay back the amount you owe over several months in smaller chunks – sometimes called ‘slices’. Again, if you miss payments, you could be hit with late payment fees. 

Pay on finance: this works the same way as a loan and a hard credit check will be done.

BNPL can appear to be a cheap way to borrow, but it might also encourage you to spend money when you might not otherwise have done.

So, before signing up, ask yourself these 4 questions: 

  1. Would I have bought this item in the first place if BNPL wasn't an option?
  2. Do I have and will I have enough money to make future payments?
  3. Is there a better or more cost-effective way to borrow?
  4. How many BNPL agreements do I already have?

When considering BNPL, check budgeting apps to see if you can afford the payments or use our online budget planner. If you have the HSBC UK Mobile Banking app, you can use our Balance After Bills feature, which helps you budget successfully from one payday to the next.

Read the BNPL terms and conditions carefully to understand any late payment fees you could be liable for. 

It’s also a good idea to research different ways of borrowing money, such as 0% credit cards or overdrafts

Pros and cons of BNPL

If managed well and you never miss a payment, BNPL can be a free way to borrow money. But keep in mind, any remaining instalments are automatically taken from your account at set dates – and missed payments can lead to:


  • Late payment fees
  • Going over your overdraft limit
  • Damage to your credit score if you’re late or miss payments

Citizens Advice says more than a quarter of those who’ve used BNPL have regretted it.

The risks of BNPL are not always clearly shown when you sign up.

You might not always remember a purchase made 2 or 3 months ago. You should receive reminders, but it’s a good idea to note down when your instalments are due. That will help you remember and make sure you have enough funds to pay on time. Otherwise, you risk having to pay a late fee.

What protection is there?

In the UK, BNPL products are not currently regulated. For example, BNPL lenders don’t have to carry out such stringent affordability checks compared to credit card or loan providers. It’s up to you to limit what you borrow and make sure you can afford to pay it off.

At the moment, using BNPL means you’re not protected by Section 75 of the Consumer Credit Act. When you use a credit card, you get this protection for purchases over £100 if goods are faulty or not delivered. You can’t complain about a BNPL product to the Financial Ombudsman either. 

However, the UK government has announced plans to strengthen rules on BNPL services. For example, lenders will need to make sure loans are affordable and that adverts are fair, clear, and not misleading. They’ll also need approval from the Financial Conduct Authority (FCA).

Avoid borrowing more than you can afford

People don’t always take as much care signing up for BNPL as they would if they were applying for a credit card or loan.

Most purchases are for relatively low-cost items. But if you’re not careful, you might end up with multiple payments you struggle to afford unless you’ve budgeted properly.

If you sign up for a BNPL agreement, you should treat it like any other debt and never borrow more than you can afford to pay back.