Nearly 11 million UK adults (20%) used unregulated Buy Now, Pay Later (BNPL) services in the 12 months to May 2024, according to the Financial Lives survey report.
BNPL services – such as Klarna and Clearpay – allow consumers to purchase a product in interest-free instalments, rather than paying the total upfront.
And the number of people using these schemes is still on the rise, with a 25% increase from 8.8 million in 2022.
Naturally, there are benefits and drawbacks associated with managing your finances this way.
Klarna user Sophie Moses, 23, from Whitehaven, said: “I like being able to split the cost of something over three months – and it also helps to build my credit score.
“I always pay my bill off on payday, but some months definitely cost more than others.”
Some BNPL services are regulated by the Financial Conduct Authority (FCA), but Deferred Payment Credit (DCP) is not, which includes the likes of Klarna and Clearpay.
Of those surveyed, 30% of 25-34 year olds and 28% of 35-44 year olds said they’d used DCP in the last 12 months.
The survey report stated the use of these services had ‘risen significantly’ in recent years.
Ally Longshaw, 26, from Preston is another Klarna user.
She said: “I use it when I’m buying clothes so I can order a few different options and then return the ones I don’t like, meaning the money for those never leaves my account.
“As soon as I get paid I pay off my Klarna bills, but sometimes I’ll end up having no money again, and it becomes a vicious cycle.”
The survey also found that 2% of all UK adults surveyed (1.1m) had £500 or more outstanding on DCP.
When you only look at the adults who had actually used DCP in the previous year, though, a startling 48% owed £50 or more.
Elsewhere in the report, the survey found that one in 10 UK adults have no cash savings, and that 21% have less than £10,000 to draw on in an emergency.
Read next: More young people than ever are worried about finances new data shows
Featured image courtesy of appshunter.io on Unsplash.
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