No doubt the vast majority of us have seen an option to pay online using ‘Clearpay’ at the checkout. But the first time I saw it, I had some questions…
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What is Clearpay?
Clearpay is a Buy Now Pay Later (BNPL) firm, one of many that have popped up in recent years allowing you to pay for items in instalments, potentially without fees.
To use Clearpay, simply sign up via its app, shop at one of its partner retailers and select Clearpay as the payment method at checkout. After making an initial payment, you’ll typically get to spread out the cost of your purchase over six weeks.
Unlike traditional store cards – which were often hellishly expensive – Clearpay does not charge interest. Instead, it makes its money predominantly by working with retailers that support its service.
While it seems a decent solution if you’re keen to avoid paying for an item or two upfront, Clearpay does charge late fees if you miss an automatic payment – so always ensure there’s enough money in your account to cover any instalments that are due.
Is Clearpay safe?
While the BNPL sector isn’t currently regulated by the UK Financial Conduct Authority, Clearpay’s Australian parent company, Afterpay Touch Group, is certified by the Payment Card Industry Data Security Standard (PCI DSS).
This means that Clearpay has satisfied the Payment Card Industry Security Standards Council that it treats cardholder data securely and is involved in the safe handling and transmission of sensitive customer credit card information.
What are the pros of using Clearpay?
Many big name brands now offer Clearpay as a payment option, including M&S, ASOS, Superdry and more, so using the service shouldn’t really limit where you can shop.
Another advantage of using Clearpay, or any BNPL provider for that matter, is the fact that it’s one of the easiest ways to obtain credit in the UK.
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Unlike a traditional credit card application that requires a ‘hard’ credit check, Clearpay instead does a ‘soft’ check, which doesn’t stay on your credit score – provided you make the necessary automatic repayments. (Find out more about your credit score).
Perhaps the most obvious draw to BNPL services is the fact that they allow you to spread out the cost of payments. So if pay day is a few weeks away and you have a need to buy something before then, as long as you’re responsible and pay the future instalments, Clearpay will enable you to pay nothing for the convenience of borrowing.
With regards to payments, these are taken automatically in the form of regular instalments – great news if you don’t trust yourself to make payments manually (though it’s possible to make additional payments too). Clearpay also has payment reminders to reduce the likelihood of surprises.
It’s also worth highlighting that Clearpay has a feature that allows you to check your available spend, ensuring you’ll never go over your defined budget.
What are the cons of using Clearpay?
Clearpay is part of an unregulated sector, so if something goes wrong then you sadly don’t have the free Financial Ombudsman service to fall back on. That said, rumours are circulating that there are plans to regulate the BNPL sector in due course.
Another drawback of Clearpay is that if you’re ill disciplined with your cash and miss payments, and then fail to pay the late fees, then it is possible your credit score will be impacted further down the line. Thankfully late fees are always capped at 25% of the purchase price, so there’s little chance of owed sums compounding to the moon.
It should also be noted that Clearpay’s credit limits are likely to be in £100s, rather than the £1,000s, so if you’re looking to use the service to spread the cost of a very large purchase then it’s best to look at other forms of obtaining credit such as a 0% purchase credit card.
If you do start with a very low credit limit, Clearpay does say that limits may gradually increase as long as you make continued on-time payments.
The final drawback worth mentioning is that should you use Clearpay to buy something over £100 then, unlike a traditional credit card, you WON’T get valuable Section 75 protection, allowing you to hold the retailer equally liable for anything that goes wrong with the product. (Find out more about Section 75 of the Consumer Credit act).
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