Shoppers buying Christmas presents on ‘buy now pay later’ end up paying double
Hard-up Christmas shoppers are being targeted by retailers charging up to 119 per cent APR for gifts on credit.
Our probe found a raft of firms are offering buy now pay later schemes which could leave consumers in debt for up to four years – and paying more than double the product’s original price.
Experts have accused companies of cashing in on the coronavirus crisis by penalising families whose finances have taken a hit and cannot afford to pay for presents up front.
PerfectHome, an online store which allows customers to pay for items in weekly instalments, is offering a range of deals at a rate of 119 per cent APR.
A Huawei media pad tablet costing £150 would actually set you back £296 if paid over two years.
Other firms, such as Argos, Littlewoods and Very have APR rates between 39 and 45 per cent.
A £230 Barbie Dream House would cost £463 if bought on a four-year deal from Argos.
And its £949 DJI Mavic drone rises to £1,912 over four years.
At Littlewoods, a 12-inch Disney Frozen bike is £126 to buy now but costs £245 in payments over four years.
Around 1.2 million people are in severe debt, according to the charity StepChange – and that figure has almost doubled since the pandemic began.
Since the first lockdown, the number of people using buy now pay later schemes has risen by 35 per cent, comparison site Compare the Market found.
Some 15 per cent of those surveyed said they were buying everything they could through such deals – compared to just four per cent last December.
This is despite the fact buy now pay later schemes are typically more expensive than other types of borrowing.
Last year, new rules were introduced by the Financial Conduct Authority to ensure that buyers were given more information about these types of offers.
But, unlike the laws in place for payday loan lenders, there is no cap on the amount of interest retailers are able to charge.
Sue Anderson, from debt charity StepChange, said: “It’s been a very difficult year for many people, so it’s no wonder that some feel pressurised to resort to credit to pay for Christmas.
“But when retailers are offering credit at rates as high as 119 per cent APR, there is the risk of exacerbating the financial stress that people have been experiencing due to the pandemic.
“It’s no coincidence that January always sees an upturn in people seeking help from us, and it’s likely to be even busier in 2021.
“With such high interest rates, it’s entirely possible that people could find more affordable credit elsewhere, rather than by using the retailer’s credit.