Are buy now, pay later services irresponsible?
The debt solutions app found that 60% of people don’t regard money owed to buy now, pay later services as “real” debt.
Freeze Debt says the impact of these services is having a huge effect on people’s mental wellbeing, with 56% of people questioned saying that being in debt negatively impacts their mental health.
The news comes as figures from the Office for National Statistics show that the UK is officially in recession, with experts fearing that the closure of government support schemes in October could mean further financial hardship for many.
“No due diligence”
Freeze Debt says that buy now, pay later services such as Klarna and Clearpay facilitate consumer spending with no due diligence to ensure their money lending is responsible.
It found that more than half (54%) of people aged 21 to 30-years-old use buy now, pay later services up to four times each month.
A fifth (20%) of young people believed debt to companies such as Klarna and Clearpay was “different to credit card debt”.
Freeze Debt also found that buy now, pay later schemes are the second most popular payment option for out of budget purchases, with more than half (52%) of Brits signing up to deliberately delay their payments. Credit cards were the most popular way to delay paying for something and used by 76% of those questioned.
Freeze Debt found the top purchases made with buy now, pay later schemes were:
- Tech (26%)
- Travel (21%)
- Clothes and shoes (19%)
- Interiors (15%)
- Gaming (14%)
- Health and beauty (14%)
- Sports (11%)
Harjit Moore, CEO at Freeze Debt, said: “Our research shows that although these buy now, pay later services look attractive and seem like a good idea at the time, they are having a huge impact on the nation’s mental health by irresponsibly facilitating unsustainable spending habits.
“We’re seeing this particularly amongst the younger Gen Z and Millennial generations, with younger spenders spiralling into more debt as a result. We’re unfortunately seeing the impact of the current pandemic on consumer debt too – for instance, during the month of July, the final month that furlough remained free for employers, organic downloads of Freeze Debt increased by a huge 364%.”