Universal Credit and Buy Now Pay Later: Your Questions Answered

Life on Universal Credit often means careful budgeting and making every penny count. When you need something essential – perhaps a new washing machine, a school uniform, or furniture – the idea of spreading the cost can be very appealing. That's where 'Buy Now Pay Later' (BNPL) services come in, offering a way to get what you need without paying for it all upfront.

But if you're receiving Universal Credit, it's completely understandable to wonder if using BNPL could impact your payments or lead to any complications. Let's break down what you need to know.

What is Universal Credit?

First, a quick recap. Universal Credit is a payment from the government to help with your living costs if you're on a low income or out of work. It's paid monthly (or twice a month for some in Scotland), and the amount you receive depends on your circumstances, including your income, savings, and whether you have children or a disability.

How does Buy Now Pay Later (BNPL) work?

BNPL allows you to purchase goods or services immediately and pay for them in instalments over a set period, often without interest (0% APR) if you pay on time. Popular examples include paying in 3 or 4 instalments over a few weeks or months. Some longer-term options exist too, but these might involve interest.

At Trusty Stores, for example, our TrustPay facility is a fantastic 0% APR option that lets you spread the cost of purchases up to £1,200, with no credit checks required.

Does using BNPL affect my Universal Credit payments?

This is the big question, and the good news is that using a BNPL service like TrustPay generally does not directly affect your Universal Credit payments. Here's why:

• It's not income: BNPL isn't considered income by the Department for Work and Pensions (DWP). You're not earning money; you're simply spreading the cost of an item you've bought.
• It's not savings (initially): While using BNPL means you're taking on a debt, it doesn't immediately count as an increase in your savings. The DWP assesses your capital (savings) to determine if it affects your Universal Credit, but this typically applies to cash savings over £6,000.
• No credit checks (like TrustPay): Many BNPL services, including TrustPay, don't perform hard credit checks. This means they won't leave a mark on your credit file that the DWP would be looking at in relation to your benefits.

What could indirectly affect Universal Credit?

While BNPL itself doesn't directly impact your benefits, there are a few related scenarios where your Universal Credit could be affected:

• Increased Savings: If using BNPL allows you to save money that you otherwise would have spent upfront, and your total savings then exceed £6,000, your Universal Credit payments might be reduced. For every £250 you have over £6,000 (up to £16,000), your Universal Credit is reduced by £4.35 per month. Savings over £16,000 mean you generally won't be eligible for Universal Credit.
• Debt problems: If you struggle to make your BNPL repayments and get into serious debt, this won't directly affect your Universal Credit payment amount. However, severe debt can cause significant stress and make managing your finances harder, which might indirectly impact your ability to focus on finding work or managing other aspects of your claim. Getting into a situation where you owe money and are contacted by debt collectors can be very stressful.
• Fraud or false claims: This is a serious point. Providing false information to the DWP, or to a BNPL provider in a way that could be seen as fraudulent, can have severe consequences for your benefits and potentially lead to legal action. Always be honest and transparent.

Using BNPL responsibly

BNPL can be a really useful tool when used wisely. Here are some tips, especially if you're on Universal Credit:

1. Budget carefully: Before committing to a BNPL plan, make sure you can comfortably afford the repayments from your monthly Universal Credit. Don't overstretch yourself. 2. Only buy what you need: It's easy to get carried away. Stick to essential purchases or items that genuinely improve your quality of life. 3. Understand the terms: Always read the fine print. Know the repayment schedule, any potential fees for late payments, and the total cost. 4. Consider 0% APR options: Services like TrustPay offer 0% APR, meaning you only pay back the cost of the item, without any extra interest charges. This is crucial for managing your budget effectively.

TrustPay: A helping hand without the worry

At Trusty Stores, we understand the challenges of managing a budget. That's why we offer TrustPay, a 0% APR, no-credit-check facility up to £1,200. It's designed to help you get the items you need without impacting your credit score or adding extra interest costs, providing peace of mind while you manage your Universal Credit.

It's a straightforward way to spread the cost, letting you budget more effectively without the added stress of conventional credit applications or the fear of affecting your DWP payments.

Frequently asked questions

Do I need to tell the DWP if I use a Buy Now Pay Later service? No, you generally do not need to inform the DWP about using a Buy Now Pay Later service, as it is not considered income or a change in circumstances that affects your eligibility for Universal Credit, as long as your savings don't exceed the threshold.

Will using TrustPay affect my Universal Credit amount? No, using TrustPay will not affect the amount of Universal Credit you receive. It's a 0% APR store credit facility that doesn't involve a credit check and is designed to help you spread the cost of purchases without impacting your benefits.

What if I can't make a BNPL repayment? If you find yourself struggling to make a BNPL repayment, it's important to contact the provider immediately to discuss your options. Ignoring the problem can lead to late fees and potentially impact your ability to use such services in the future. Seeking advice from debt charities like Citizens Advice can also be very helpful.

Shop with confidence at Trusty Stores, knowing you can spread the cost with TrustPay.