Families are being warned of the pitfalls of buy-now-pay-later (BNPL) schemes during the Christmas shopping frenzy.
Swedish provider Klarna is the latest to offer interest-free payments over three instalments - but experts say there are hidden dangers with BNPL.
Irish Sunday Mirror money man Morgan O’Connell said it could create a “disconnect” and reduce ability to keep control over spending.
Morgan, a financial adviser with Arrow Coaching, warned: “It sounds great, with shoppers able to spread out payments over three months, giving an alternative to high interest credit cards.
“Another benefit is you can return unwanted items even before paying for them and without the hassle of refunds.
“Klarna pairs up with retailers and the retailers pay them fees. It seems like a win-win-win situation.”
But, he said, if a customer defaults on repayments Klarna will hand the account over to a debt collection agent.
He revealed: “I have insight into Klarna previously as I have coaching clients in the UK having trouble juggling numerous staggered Klarna payments, making their finances a complicated misery.
“Like credit cards, used correctly this can be an effective way of financing purchases.
“But like the abuse of credit cards, especially around this time, treated incorrectly it can lead to an overcomplication and a lack of awareness of what bills are coming down the tracks.
“It also poses the question do you really need to buy now and pay later or do you just want to?”
New research from the Irish Competition and Consumer Protection Commission found one in three shoppers plan to get into debt to fund Christmas spending.
The CCPC cautioned consumers to closely manage Christmas credit to avoid being overwhelmed by repayment demands in the New Year.
Last month, Ireland’s Money Advice and Budgeting Service investigated the new BNPL providers.
MABS advises customers to pay for an item up front if possible, rather than dragging it out.
Spokeswoman Michelle O’Hara said: “Online shopping doesn’t close and that is one of the advantages and challenges.
“When you’re under pressure to purchase there is always the possibility that you end up paying more for a product.”
Late or non-payment of credit products, where the amount is over €500, could end up putting a black mark on a Central Credit Register Report.
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