Shoppers warned away from 'buy now, pay later' services ahead of Christmas

Research from Ireland’s consumer watchdog suggest that the average expected spend on Christmas rose significantly last year to €1,177. File photo

Consumers have been urged to avoid “buy now, pay later” services for their Christmas costs this year, as households prepare to borrow to be able to afford festive spending this year.

Price comparison website Bonkers.ie has told consumers to borrow responsibly and think carefully about the best forms of finance to use when it comes to affording Christmas socialising, gifts and food.

“With the cost of groceries and health insurance continuing to soar, no double child benefit payments this year, and the removal of energy credits in the recent budget, strained household finances could see an increase in the numbers borrowing to pay for Christmas,” its head of communications Daragh Cassidy said.

Research from Ireland’s consumer watchdog suggest that the average expected spend on Christmas rose significantly last year to €1,177.

The Competition and Consumer Protection Commission said its data also suggested while most intended to use savings to pay for Christmas, 20% of consumers planned to borrow over €600 on average to afford it.

With food alone up almost 5% in the year to September, it is likely households will be forking out far more again this Christmas to just purchase the same items as last year.

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Bonkers.ie said given cost-of-living pressures, the number of households borrowing to afford their Christmas spending this year could rise. On credit cards, it said this can be a convenient way to spread the cost of Christmas if used wisely.

“If it’s not possible to clear the balance in full, consumers should aim to pay off as much as possible rather than just the allowed minimum repayment, which can be as low as 3% of the outstanding balance,” it said. 

Paying only the minimum will lead to far higher interest costs in the longer run. 

Personal loans are a better option for bigger purchases as interest rates are usually lower than those charged on credit cards but the term of the loan should be kept to within one year to ensure you aren’t still paying off last Christmas by the time the next one arrives.

Overdrafts, meanwhile, should only ever be used for “short-term cash flow issues” as they can come with high interest rates while savings are usually the most cost-effective way to finance Christmas spending.

On the topic of “buy now, pay later” (BNPL) services, the website advises against using them for non-essential or small purchases, and warns consumers to avoid juggling multiple BNPL accounts at once. 

"Failing to fully repay a BNPL purchase could also result in the pursuit of the debt by a debt collection agency and negatively impact future access to credit or mortgages.”