Buy now, pay later - a debt trap?

Sylvie Ernoult

Again and again, young people brag about their debts to "buy now, pay later" providers on the net. In this text, you will find out why paying on account does have advantages. We also give you five tips against over-indebtedness.

One click and the new shoes or the chic coat are already in the shopping basket. Not least in the fashion sector, online trade is rapidly increasing. The relevant e-commerce providers are increasingly offering the option to buy on account. With a turnover share of 30.4 percent (source: EHI), payment after receipt of the goods is the Germans' favourite means of payment online.

Buy now, pay later: payment on account is easy

The advantages of buying on account are obvious. If the customer hesitates between two sizes, he can order both and only has to pay for the goods he actually keeps. Consequently, he does not have to wait for a refund for the goods he has already paid for but returned, and his wallet is correspondingly less burdened.

Why caution is advised with buy now, pay later (German language). Source: YouTube

Buying on account in online retail is simple. With a few clicks and the specification of the date of birth, the purchase on account is completed. As a rule, the amount is due within the next two weeks, although the payment deadline can often be postponed again. If payment is not made by then, the customer must reckon with reminders and the case being passed on to a debt collection agency. However, it is becoming increasingly common to offer to pay for the goods in instalments with corresponding interest (as an instalment credit).

Risk of buy now, pay later: over-indebtedness looms

The downside of the option of postponing payment: the temptation to buy goods that the consumer cannot afford is great. Especially the offer to postpone the payment of the invoice again via a simple mouse click makes it possible to fade out the due date for the time being. For some people, this can turn into a consumption trap. Although online shopping often involves smaller bills, these can easily add up to larger amounts. 

What you should know: Most e-commerce providers do not offer purchase on account themselves, but rather through third-party providers who offer credit at the same time as the purchase. Appealing websites with direct integration of advertising for large e-commerce businesses are the trademark of these operators. The target group addressed is young and lifestyle-savvy. buy now, pay later caution is advised

5 tips against over-indebtedness

In the meantime, there are special hashtags in the social media under which young people address their debts from "buy now, pay later" and ask for help within their community. But it doesn't even have to get that far! Because despite all the temptations, some principles should always apply:

  • Stay within your financial means

You should keep a close eye on your account balance, your monthly fixed costs and your other usual expenses. This way, you can assess how much money is actually available for consumption and leisure and do not run the risk of accumulating unpaid bills that exceed your means. 

  • Pay by the due date at the latest

Interest on arrears, reminder fees and costs for debt collection can be high. Try to avoid these by paying on time. It can help to record income and expenses as well as due dates in a (digital) budget book. You can find free templates for this online at the consumer centres, for example.

  • Compare not only the prices of goods, but also the financing costs. 

If you do decide to take out a consumer loan, do not automatically take the loan that is offered to you directly at the time of purchase, but also analyse other offers thoroughly. Compare the APR for the term of the loan. This is calculated by all providers according to the same formula. The price differences can be considerable. 

  • Keep an eye on the total amount

Don't be dazzled by low rates, but look at the total amount (cash price of the goods plus financing costs) that you have to pay in total. 

  • Beware of additional products

Be critical if you are offered financing options with the credit-based payment method that go beyond your current needs, such as a credit card. Familiarise yourself with the terms of use, interest rates and costs before using them.



Sylvie Ernoult

Media Spokeswoman

Association of German Banks

+49 30 1663-1210E-Mail senden