The schemes have risen in popularity over recent years with those earning over £100k worse affected, new research finds
London, 6th November 2019 – Buy now pay later schemes are luring people into living beyond their means according to a recent survey by Hastee. Half of respondents said buy now pay later options encourage them to spend money they don’t have and this rises to 59% for millennial respondents (those aged 18-35).
Buy now pay later schemes have become a popular interest bearing option where retailers allow consumers to delay payments on their purchases for a specified period. More than a quarter of respondents (27%) said they have experienced difficulties after using buy now pay later schemes. The same percentage of respondents said they have experienced problems after using payday loans which have come under increased scrutiny in recent years, resulting in the Financial Conduct Authority (FCA) stepping in to apply limits on daily borrowing.
Millennials are the worst-hit age group when it comes to experiencing difficulties after using buy now pay later schemes – over a third (36%) said this has been the case. Financial stress has impacted their social lives (50%), relationships (40%), health (39%) and work (38%).
The survey revealed that workers across all salary bands agree that the schemes encourage them to spend money they don’t have. The figure tends to rise in the higher salary bands, highlighting that this issue is not exclusive to lower paid workers:
- Up to £20k salary: 45%
- £20-30k salary: 49%
- £30-40k salary: 52%
- £40-50k salary: 43%
- £50-27k salary: 50%
- £75-100k salary: 59%
- Over £100k salary: 77%
“Buy now pay later schemes might seem an attractive option for consumers but they’re proving to be as problematic as more traditional forms of credit,” says Hastee
CEO James Herbert. “While they seem like a good short term solution, they can cause consumers issues in the longer term. Missed payments can impact credit scores, cause longer term debt problems and could create an unhealthy reliance on credit cards and overdrafts as users struggle with repayments.
Our advice for anyone tempted by one of these schemes is to make sure you’ve weighed up the affordability of the purchase and explored all options before making any commitments. If you can’t afford the repayments, consider whether you really need the item or work out another way of paying for it that won’t cause you long term financial difficulty. There are plenty of digital money management tools that work together to help people live comfortably and within their means, such as challenger banks, earnings on demand solutions and budgeting apps.”
Hastee is an award-winning employee benefit which empowers employees to receive their earned pay immediately via our mobile app, increasing their choice and financial wellbeing. Workers can choose to receive up to 50% of their gross pay for the work they have completed; it is income smoothing of their earned pay, not a loan. Companies may choose to restrict the availability for their staff to below 50% should they wish/need. We do not charge interest, just a low and simple fee (subscription and on-demand options).
Companies profit from the improved recruitment, retention, engagement and productivity of their workforce. This is at no cost to the employer (unless they wish to contribute as a paid benefit) and has no impact to company cash flow (we fund the advances, with the company reimbursing us when they pay their staff as normal). Giving access to earned pay only, Hastee is a meaningful benefit that can be made available to all staff, including salaried, temporary, variable and gig workers.
Additionally, we have now launched an employee financial education programme in the form of a series of emails over a period of 7 weeks. Companies can choose to include as many of their staff as they wish in this programme at no cost, or leave to only those who register with our app. Related to this, we have content available on the Financial Education Hub on our website and, obviously, within the app.