How does Clearpay work?

Buy Now, Pay Later (BNPL) options are becoming increasingly common in online shopping baskets. Chances are you’ve seen the turquoise Clearpay logo when you hit the checkout – but how does it work, and will it affect your credit score?   

Let’s unpack the details and explore the upcoming new BNPL rules designed to protect shoppers in the UK. 

What is Clearpay? 

Clearpay lets you split the cost of your purchases into four equal instalments, typically paid every two weeks. You’ll make the first payment upfront, and the remaining three are automatically deducted on schedule. It’s interest-free as long as you pay on time. 

This flexibility has made BNPL services like Clearpay, Klarna, and PayPal Pay in 3 popular, especially among online shoppers who want to spread costs without relying on traditional credit cards. 

Could Clearpay affect your credit score? 

Clearpay doesn’t currently report to the credit reference agencies in the UK. This means using it won’t directly affect your credit score or appear on your credit report.

But it’s important to keep on top of your repayments, as missing multiple could lead to additional fees or any outstanding debt being passed on to debt collectors.  

That said, regulation is catching up with the rapid growth of BNPL. Here’s how… 

New UK BNPL regulations: what’s changing? 

In October 2024, the UK government announced plans to introduce new rules to make BNPL safer and more transparent for shoppers. Here’s what you need to know: 

1. Affordability checks: Clearpay and similar providers will need to perform more in-depth assessments to decide whether repayments are affordable for you before offering credit.  

2. Clear information: Information about the agreement should be easy-to-understand, include details about your payment terms and the risks of missing payments. This is to help people understand what they’re signing up to, so they can make the best decision based on their finances. 

3. Stronger consumer rights: Protections like those for credit card users will apply. For example, under Section 75 of the Consumer Credit Act, you could claim refunds through Clearpay if something goes wrong with your purchase. 

4. Access to dispute resolution: You could have the option to escalate complaints to the Financial Ombudsman Service. 

These changes, if accepted, are expected to roll out fully by 2026, and aim to prevent unmanageable debt while fostering innovation in the BNPL sector.  

Is Clearpay a good idea? 

Clearpay can be a helpful way to spread costs, but it’s important to use it responsibly. Make sure you can meet the repayment schedule and avoid treating it as ‘free money.’ 

Consider your long-term financial goals and how Clearpay could impact them. Missing payments – even on interest-free products – can create stress and financial strain. 

Final thoughts 

Clearpay is changing the way many people shop, but like any credit product, there are risks. The proposed new UK regulations are a step towards making BNPL safer, but it’s important to manage your credit health responsibly. 

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