What borrowers need to know
An impulse purchase feels like a one-off decision. But when you pay with a credit card, use buy-now-pay-later (BNPL), or dip into your overdraft, that purchase becomes a debt. And debt costs money.
The important bit is this: the total amount you repay is almost always more than the price of the item you bought. How much more depends on the interest rate, how long you take to repay, and whether you make only minimum payments.
Credit cards: UK credit cards commonly charge between 20% and 40% APR. If you spend £300 on impulse and only make the minimum payment each month, you could take several years to clear the balance and pay a significant amount in interest on top. MoneyHelper's guidance on credit card costs explains this clearly with worked examples.
Buy-now-pay-later (BNPL): Many BNPL plans charge no interest if you pay within the promotional period. Miss that deadline, and some providers apply interest from the original purchase date, not just from when you missed the payment. The FCA has set out consumer protections that now apply to many BNPL products, but the cost of missing a payment can still be substantial.
Overdrafts: Arranged overdrafts on UK current accounts are required to display a single annual interest rate, making them easier to compare. Rates of around 39.9% EAR are common with several major banks, according to FCA data on overdraft pricing. Using your overdraft for impulse spending means you are effectively borrowing at that rate.
The key point is that a smaller total spend each month means less reliance on these credit products. Reducing impulse purchases does not just save the face value of items, it can reduce the total amount you need to borrow and, with it, the interest you pay over time.
Why this matters
Borrowing to cover day-to-day purchases gradually increases the size of the debt you are managing. A pattern of small impulse buys, each charged to a card or BNPL account, can build into a balance that takes months or years to clear.
The total amount repayable, the full cost of credit including all interest and charges, is a more useful number to focus on than the monthly payment. A low monthly payment can hide a long and expensive repayment period.
Who may be affected
This is worth thinking about if:
- you regularly carry a credit card balance from month to month
- you use BNPL for everyday purchases, not just larger planned items
- your overdraft is used most months and rarely fully cleared
- you are finding it harder to reduce a balance despite making regular payments
These are all signs that the cost of credit may be rising, not falling.
A practical way to pause
Before making an unplanned purchase on credit, it can help to check three things:
- What is the APR on the card or account you are using?
- How long would it take to repay this if you only made minimum payments?
- What would the total amount repayable be?
A loan repayment calculator can give a rough answer to questions two and three. The answer is often larger than expected.
What to read next
- Understanding loan interest rates, how APR and total repayable are calculated
- Credit cards explained, how interest accrues and what minimum payments really cost
- Personal loans guide, when a fixed-term loan may be cheaper than revolving credit
Sources
- MoneyHelper, guidance on credit card costs and minimum payments (moneyhelper.org.uk)
- Financial Conduct Authority (FCA), overdraft pricing rules and consumer credit guidance (fca.org.uk)
- Bank of England, consumer credit data (bankofengland.co.uk)