Its ‘Pay in 3’ scheme will launch in late October, and will be available to use at Crew Clothing, French Connection, Robert Dyas and Ryman.
PayPal’s new payment option is similar to those offered by Clearpay, Klarna and Laybuy, although each scheme varies in terms of repayments and late fees.
While the option to spread the cost of Christmas or big purchases on Black Friday might be appealing, it’s important to be clear on how each scheme works and what to do if something goes wrong.
Here, Which? explains how PayPal Pay in 3 will work and analyses how it compares with BNPL services from Clearpay, Klarna and Laybuy.
How do the repayments work?
Each BNPL scheme has a slightly different way of taking payments from you.
Many of the schemes will take your repayments automatically, so it’s important to make sure you’ve got enough money in your account ahead of your repayment date.
How much can I spend?
Some BNPL schemes will offer you a credit limit, based on your repayment history and an affordability assessment.
The retailer you’re shopping with might also ask that you spend a certain amount to qualify.
Late fees: what happens if I miss a payment?
Most BNPL schemes are interest-free, but you can incur fees for late payments. These fees can be considerably higher than your initial purchase.
Missed payments or failure to pay back can also be noted on your credit report and the mark can stay there for six years.
Don’t bury your head in the sand if you think you’re going to miss a repayment – contact the firm as soon as possible to let them know and rearrange a payment plan.
Something’s gone wrong with my order: what protections do I have?
Aside from Klarna’s ‘Pay in 6 – 36 months’ finance option, BNPL schemes aren’t regulated under the Consumer Credit Act.
This means you won’t be protected by Section 75 of the Consumer Credit Act (as you would with other forms of credit) if something goes wrong with your order.
Each BNPL firm has its own protection policy in lieu of Section 75, so it’s worth looking into this before signing up to one.
If you use PayPal’s ‘Pay in 3’, you’ll benefit from its Buyers Protection scheme, which helps you secure your money back if your order doesn’t turn up or isn’t as described.
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.
How to shop safely with BNPL schemes
- Set a spending limitMake sure you know what you can realistically afford to pay back before purchasing.
- Return unwanted items swiftlySend back any unwanted items promptly to ensure your balance is updated before repayment dates.
- Use reminders Track when your next repayment is due by setting alerts on your phone or in your diary.
- Don’t sit in silence Tell the BNPL firm if you know you’re going to miss a repayment. They may be able to freeze late fees or offer an alternative option.
