Many people are using credit cards to pay off their buy now, pay later debt, stoking fears of a cascading “debt trap” as cost of living pressures continue to bite.
Rachel Wastell, spokesperson for research house Mozo, says it is dangerous to pay off BNPL debt with a credit card, as you risk incurring interest on the credit card debt if the card debt is not paid off by the due date. Wastell says the risk of getting caught in “cascading” debt has increased with the advent of pay advance, or wage advance apps. These are where you can access your pay ahead of time, with the advance repaid, along with a flat fee or a percentage fee, when you are paid by your employer.“If you have multiple debts, using one to pay off the other can be dangerous, especially if you end up taking on more debt by applying for pay advances just to cover what you owe,” Wastell says.
Credit bureau illion expects credit card and home loan delinquencies to continue to rise in coming months.
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