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31 Jan 2020

From Klarna to Clearpay: your rights and tips on how to use 'buy now, pay later' safely

Which? explains what you need to know about buyer protection, returns and more

'Buy now, pay later' (BNPL) schemes such as Clearpay, Klarna and Laybuy only take a couple of clicks to sign up to, but resolving an issue if something goes wrong might not be as straightforward.

Every BNPL scheme will operate differently, which can get confusing if you use more than one, and failure to make a repayment can harm your credit score.

Before you choose to use one, it's important that you're clear on how the repayments work and what to do if there's a problem with your order.

Here, we outline our tips on safely using the new wave of BNPL options at the online checkout.

Have you ever had an issue with a BNPL scheme? Tell us about it using our new BNPL complaints form.

1. Know your rights if something goes wrong

When you pay for something with a credit card, you have extra protection under Section 75 of the Consumer Credit Act.

This means that if you pay for anything worth between £100 and £30,000 on your credit card, and your order doesn't turn up or is faulty, you can claim the money back from your card provider.

Most BNPL schemes aren't regulated under the Consumer Credit Act, which means you won't benefit from Section 75 protection, although each scheme does have a protection policy in place.

Both Klarna and Laybuy told Which? that they would cancel the debt if something went wrong with an order, while Clearpay said that customers may be refunded if the issue with the retailer couldn't be resolved.

If you're making an expensive purchase, or want guaranteed protection, it might be worth taking out a 0% credit card to pay instead.

They work in a similar way to BNPL schemes, but allow you to spread out the cost of repayments over a longer period (three to 27 months) and have the added bonus of Section 75 protection.

2. Set up alerts for payments

Missing repayments can leave a mark on your credit report for six years, so it's crucial you know when you need to pay up.

Klarna's 'Pay later' option asks that you make the full payment 14 or 30 days after shopping, depending on the retailer.

Other schemes, offered by Laybuy, Clearpay and Klarna, allow you to split the payments across a number of instalments, which could get confusing if you don't track the dates somewhere.

Most of these instalment schemes will automatically take the money from the card you registered with, so it's worth setting reminders on your phone or calendar to ensure you have enough in your account.

3. Be clear on the penalties for missing payments

Every scheme has different penalties for failing to pay, and it's important you know what the repercussions are.

Klarna doesn't charge for late payments, but if you default it can charge the outstanding balance on any card it has for you.

Late payments to Laybuy and Clearpay are penalised with extra fees.

If you're going to miss a payment, don't bury your head in the sand. You should get in touch with the company, as it may be able to freeze late fees or suggest another arrangement.

4. Make your returns promptly

Not sure which size to get? Or hesitant over whether you can pull off PVC trousers?

Buy now pay later schemes are handy if you want to try a range of sizes or styles.

But if you're making returns, it's wise to do so promptly. You want to ensure your balance is updated before your payment is due, so you're not paying for items you don't want.

For payments across multiple instalments, each scheme has a different policy on how it recalculates your remaining balance.

Make sure you're clear on exactly how much you'll be charged for the remaining payments, and ask for a refund if you think you've overpaid.