Technology has made shopping easier than ever. With just a few taps on your phone, Buy Now, Pay Later (BNPL) lets you split any purchase into smaller instalments - no interest, no fuss, no pain.
But this convenience comes at a cost. One-in-five of UK shoppers have used BNPL, and 41% of them reported a late payment in the past year. Some experts believe the ease of click-to-buy can make it harder to notice how it affects your mindset and your money. BNPL can feel free at first, even though you’re still borrowing.
Before you buy something next time, it’s worth taking a moment to understand what really happens when you click that ‘pay in three’ button.
Tim Hogg, Behavioural Economist and Director at Fairer Finance, says: “Psychologically, we feel like it’s less expensive. When I’m looking at a £30 pair of shoes, if it says the first payment is £10, even though I know that I’ll pay £10 three times, research shows that I feel like it’s actually cheaper.”
What is BNPL?
BNPL lets you spread the cost of something into smaller payments over a few weeks or months. Unlike credit cards, BNPL is interest-free if you pay on time - which is part of what makes it so appealing.
The BNPL sector has grown rapidly in recent years. What started as a way to spread the cost of big purchases, like furniture, is now often used for smaller everyday buys - from £30 beauty products to clothes and gadgets.
But there’s a catch. BNPL isn’t fully covered by the usual credit rules yet. Because it’s short-term and 0% interest, it’s not covered by the Consumer Credit Act that governs other borrowing. That means fewer protections for shoppers and fewer checks on how BNPL companies operate. New rules are due to start in July 2026, and they should bring BNPL under closer supervision.
How much do we spend at Christmas?
The pressure to spend during the festive season is real. On average, people in the UK spend around £700 more in December than in other months - roughly 30% more. And each year, the shopping season starts earlier, stretching that financial strain across several months.
Research shows around half of us will use some form of credit to pay for Christmas, and 40% will specifically turn to BNPL. Many will still be paying off their festive spending in July - just in time to start planning for the next one.
Why BNPL isn’t really ‘free’
It might feel free, but BNPL has hidden costs. Providers charge retailers between 2-5% per transaction, and those costs are usually passed on to shoppers through higher prices.
More importantly, BNPL can quietly change how we spend. Research from Harvard in 2022 found that people using BNPL spent an average of £50 more per week - a permanent increase in spending, mostly on retail. That’s roughly £2,600 a year.
When you use BNPL, you separate the ‘pain of paying’ from the pleasure of buying. You get the dopamine hit now and defer the discomfort until later. It’s why it’s so effective at encouraging extra spending.
Seven ways to protect yourself from overspending
BNPL can be handy for spreading the cost of bigger things, but it’s important to use it mindfully. Here are seven steps to help you stay in control.
1. Avoid using BNPL apps as shopping platforms
Many BNPL apps now look more like online stores, filled with offers and recommendations designed to tempt you.
If you have a BNPL app, avoid browsing it. Only use it at checkout when you’ve already decided to buy something.
2. Set a personal spending threshold
Set your own BNPL boundary. For example, you might decide to only use it for things that cost more than £500, or another amount that feels right for you.
This creates a natural pause between impulse and decision. If you wouldn’t normally split a £30 spend into instalments, don’t let the app persuade you.
Alice Tapper, Founder of GoFundYourself, says: “I’m a huge fan of open banking apps that nudge you into automating your savings, or that say you’ve spent a little more this month.”
3. Keep track of payment dates
Even savvy spenders can miss a BNPL payment. Don’t rely on app notifications. Add reminders to your calendar and set up a Direct Debit as soon as you buy.
4. Add friction to the buying process
Enable two-factor authentication (2FA) on shopping and payment apps. Stay logged out so you have to sign in each time. Those few extra seconds of friction are often enough to stop late-night impulse buys.
5. Try the ‘favourite’ strategy
Instead of adding items straight to your basket, save them to your favourites or wishlist. Revisit them a week later - you’ll often find the urge has passed, or that you’re more selective about what you really want.
6. Use open banking apps to stay informed
Budgeting tools can show you where your money’s going and alert you when your spending spikes. Many also let you automate savings, so you’re building financial security as easily as you’re spending.
7. Make a realistic budget
Before the festive rush begins, plan what you’ll spend and how you’ll fund it. Consider Secret Santa arrangements or spending caps. And give yourself permission for some guilt-free spending. Setting aside a small ‘fun’ budget makes your plan more sustainable.
Summary
BNPL can be a helpful way to spread the cost of bigger purchases, but the convenience often leads to overspending. Research shows BNPL users spend an average of £3,000 more per year. To protect yourself and stay in control:
Don’t browse BNPL apps - checkout only, not a shopping destination.
Set a spending threshold - only use BNPL for purchases above a certain amount.
Mark payment dates manually - don’t rely on app notifications.
Enable two-factor authentication - add friction to impulse purchases.
Use wishlists first - wait a week before buying.
Try open banking tools - track spending and automate savings.
Budget with wiggle room - include some guilt-free spending money.
Listen to episode 44 of The Pension Confident Podcast, where our expert guests unpack the psychology of spending and share practical ways to protect your finances this festive season. You can also read the full transcript.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
