Amazon shopper? Think twice before using its new ‘Buy Now Pay Later’ service

Amazon has joined the ‘Buy Now Pay Later’ party. But how does its new service compare with borrowing on 0% credit cards? Karl Talbot takes a look.

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Amazon is the latest retailer to jump on the ‘Buy Now Pay Later’ bandwagon. The world’s largest shopping website has announced a tie-up with Barclays, meaning UK customers can now postpone paying for goods bought on its website.

Here’s what you need to know about the service – and why you may wish to avoid it.

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How does the Amazon Buy Now Pay Later service work?

If you’re an Amazon shopper, you now have the option of using Buy Now Pay Later (BNPL). This means you can spread the cost of Amazon purchases over a period of three to 48 months, with no late repayment fees.

The service can be used for items sold directly by Amazon and through third-party sellers listed on its platform. However, it’s worth knowing you can only use BNPL for purchases costing £100 or more.

If you want to use the service, you must select the ‘Instalments by Barclays’ option during the checkout process. You’ll then be directed to the Barclays website to fill out an application. Following this, you’ll then either be approved or rejected. If you are approved, Barclays will give you a credit limit, which is the maximum amount you can spend via the service. 

It’s worth noting that while Amazon’s BNPL service applies to ‘millions of items’, you cannot use it to buy gift cards,  groceries, subscriptions or out-of-stock items. You also have to pay back at least £15 per month.

What has Barclays said about its partnership with Amazon?

Following the launch of the service, Ruchir Rodrigues, head of Barclays Cubed & Consumer Bank Europe, commented that the bank had taken a ‘big step’ thanks to its partnership with Amazon. He explained, “This is another major step in our ambition to reinvent payments at the point of sale and delight customers.

“Amazon offers a world-class shopping experience, and this new service gives users a fully reusable payment-by-instalments option, which they can use to spread the cost of purchases over a longer period.”

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Why should Amazon shoppers think twice before using the service?

While Amazon’s new BNPL service may seem like an easy way of spreading the cost of purchases, it comes at a cost. That’s because you’ll usually be charged 10.9% rep APR interest on anything you buy using the service. 

While this isn’t a horrendous rate, paying interest on purchases can easily be avoided. That’s because a number of specialist 0% purchase credit cards offer long interest-free periods.

Right now, you can borrow for up to 23 months at 0% through Sainsbury’s Bank. Alternatively, M&S Bank offers 21 months at 0%. Both of these cards have a rep APR of 21.9%, though you won’t have to pay any interest as long as you pay at least the minimum payment each month – and clear your balance before the 0% periods end.

Stick to these rules and you can essentially borrow at no cost. For more options, see our list of top-rated 0% purchase credit cards.

Can Amazon’s BNPL service beat normal credit cards?

While 0% credit cards are a cheaper way of borrowing, if you’re not eligible for one of these cards, you may wish to use Amazon’s BNPL service rather than relying on a bog-standard credit card. That’s because normal credit cards often come with hefty interest rates, sometimes as high as 40%!

It’s also worth knowing that Amazon’s new BNPL service may, from time to time, offer promotional interest rates. So if you get the option of using Amazon’s BNPL at 0%, this can be another way of borrowing at no cost. Just ensure you’ll be able to afford the repayments.

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