Festive 'buy now pay later' deals: all that glitters is not gold

AS THE festive season promotions intensify, the National Financial Ombud (NFO) South Africa is urging consumers to exercise caution with Buy Now Pay Later (BNPL) offers.

While heavily marketed as simple, convenient, and interest-free payment options, BNPL arrangements carry hidden risks, said Nerosha Maseti, the Lead Ombud for Banking and Credit within the NFO.

"In an economy where many households are already burdened by debt, these schemes can deepen financial vulnerability and strain," she said. 

"BNPL products are not covered by the National Credit Act (NCA). That means the usual consumer protections such as affordability checks, clear cost disclosures, and formal dispute resolution channels simply don’t apply. Yet despite this regulatory gap, BNPL is spreading fast across South Africa, often leaving consumers exposed without fully grasping the risks." 

She warned that the explosive growth of BNPL, paired with weak regulatory guardrails, was a recipe for trouble, as vulnerable consumers risked slipping deeper into debt as BNPL spreads unchecked.

“Buy Now Pay Later may appear harmless or even helpful, but in reality, it operates as a form of unregulated short-term credit. When payments are missed, fees escalate. Budgets collapse. What starts as a convenient purchase can turn into a serious financial setback, particularly because consumers do not benefit from the usual protections provided under the NCA." 

Maseti said the BNPL often stacked on top of existing financial commitments, intensifyed debt pressure.

“BNPL doesn’t make items cheaper; it simply postpones payment. In reality, it creates a fresh debt obligation at a time when many households are already battling loan repayments, store accounts, and monthly bills. Without affordability checks, the danger of slipping into overindebtedness rises sharply." 

BNPL debt creates financial burden heading into January

Maseti said most BNPL agreements entered into during December required repayment in the first months of the new year.

“January and February are already challenging months for many families due to school-related expenses, annual increases in debit orders and the effect of festive season spending on disposable income. By adding BNPL instalments onto existing credit commitments can quickly disrupt a consumer’s entire financial ecosystem. This may lead to arrears, penalty fees, negative credit listings and, in some cases, formal debt collection action early in 2026,” she warned.

While South Africa continues to experience elevated levels of over-indebtedness, BNPL adds an additional layer of risk because these arrangements often do not appear on conventional credit profiles, she said.

"Without credit-worthiness checks, consumers may, therefore, take out multiple BNPL deals across various retailers, underestimating how quickly the instalments accumulate. Other key concerns include low initial instalments that mask the actual cost of repayment, the absence of affordability checks and the growing trend of consumers using BNPL to cover everyday essentials instead of discretionary purchases.

“Many consumers assume BNPL is not real debt because it is easy to access. In practice, it can significantly undermine their ability to keep up with essential credit obligations such as mortgage payments, vehicle finance, and personal loans. We are concerned about the potential for BNPL to become a systemic contributor to rising over-indebtedness."

Consumers’ responsibility when accessing BNPL

Because BNPL is not protected under the NCA, the responsibility to assess affordability rests entirely with consumers.

"Before entering a BNPL arrangement, the NFO encourages consumers to consider whether the instalments can be fully repaid and on time next year and whether new obligations will compromise the ability to meet existing credit commitments. Consumers should also avoid using BNPL for everyday necessities such as groceries, school supplies, and household bills, and should be cautious of taking multiple BNPL agreements from different retailers at the same time.

A call for consumer self-protection

Since BNPL is marketed as a convenient and sometimes interest-free solution, the absence of legal protection raises the risk of harm.  

“We urge South Africans to think ahead. If an item cannot comfortably fit into your current budget, using Buy Now Pay Later does not make it more affordable. It simply shifts the repayment into a new year that may already be financially demanding. Consumers who feel overwhelmed by debt, or who are uncertain about their financial obligations, are encouraged to contact their credit providers as soon as possible failing which they may contact the NFO for guidance. The earlier consumers seek help, the more options they have to prevent long-term financial harm."

Tips for consumers this festive season:

The NFO offers the following steps to help South Africans safeguard their financial wellbeing and avoid over-indebtedness in 2026:

• Be honest about affordability: Assess whether you can repay the full amount in the coming months without compromising essential expenses. If you are already struggling to meet current commitments, avoid BNPL entirely.

• Read and understand the terms: Before accepting a BNPL offer, make sure you know what happens if you miss a payment, incur a late fee or fall behind. If the terms are unclear, treat that as a warning sign.

• Avoid taking multiple BNPL deals: Different retailers may offer separate BNPL options. Stacking several of these agreements can quickly become unmanageable.

• Do not use BNPL for essential items: BNPL is unsuitable for groceries, school stationery, transport, rent or medical needs. These expenses signal that your budget is already under strain.

• Track your payment dates carefully: Record all instalment dates in a diary, budgeting app, or digital calendar to avoid missed payments during the financially pressured months of January and February.

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