Buy now, pay later, not bad, but be careful


Those cheesy TV infomercials promising “three easy payments of $ 19.99” were pretty ahead of their time. While calling a toll-free number to purchase items as seen on TV is no longer in fashion, the idea of ​​paying in installments remains popular thanks to a booming market for buying services now, from payment later.

With companies like Affirm and Klarna, and credit card issuers like Chase and Citi, you now have several ways to spread the cost of large purchases. Of course, there are rules and limitations: some BNPL services partner with specific merchants, while credit card companies require you to carry one of their cards to participate.

But the limitations didn’t stop it from becoming a trend. In June 2021, Competiscan, a company that tracks and analyzes direct marketing activities, noted a 530% increase in BNPL’s email marketing campaigns over the past year, with 28% of emails from detail mentioning BNPL in the first quarter of 2021.

BNPL remains a form of debt, however. If you are low in debt and prefer to save for large purchases and pay for them in full, this is indeed a great tactic. But debt is not inherently bad. It is simply a financial tool that can make large purchases more manageable. As with any financial tool, it all depends on how you use it. Here are a few ways to use BNPL in a thoughtful way.

Know what you can afford

Andrew Gold, financial advisor at Prestige Wealth Management in Southlake, Texas, used BNPL’s services to fund major purchases, including travel bookings, business purchases and a new mattress. As someone who frequently discusses expenses with clients, he recommends considering BNPL when you can afford to pay something in full, but paying in installments would help you manage your cash flow better. Before choosing a payment plan, take a look at what you have in your bank account and how much money you make each month, so you know you can afford the payments as well as your other obligations.

“It’s not for someone who complains about never having money, or who always borrows money from people,” he says. “It’s for people who have a consistent income, who are looking for ways to experience some of the benefits and convenience of breaking a purchase in a matter of weeks.”

Yes, you can rush for the right shampoo and split the purchase into four payments of $ 6, but just because you can doesn’t mean you should. BNPL’s services are useful, but they also make impulse buying too easy when your budget is tight. “We are in a world of instant gratification,” Gold says. “There is a ton of excess and excess in everyone’s life.”

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Check the fine print before you buy

Before making a large purchase, find out how you can get your money back if you return the item, if it gets lost in shipping, or if it arrives damaged. What rights do you have if the merchant does not reimburse you?

If the merchant allows refunds, you can get your money back. Affirm, Klarna, and Afterpay will give you a full refund, for example, although Affirm notes that if your plan includes interest payments, you won’t get that money back. If you need to dispute a charge because the item is missing or damaged, your first step is to contact the merchant directly, much like you would if you were paying with a credit card. In some cases, if the merchant gives you store credit instead of a refund, you still need to make payments according to your installment plan.

Get started with a strategy

Stay organized by using BNPL for very specific purposes, like a series of purchases for an event. Alexandria Broward used BNPL when she and her husband decided they wanted to get away in a month.

With just three weekends to find a dress and sort out other logistical issues, Broward put some spending on credit cards and used BNPL for her outfit. She ordered several dresses and paid a fraction of the cost, returning all but one of them and getting money for those returns. His tactic was to avoid putting the full cost on credit cards. She also used BNPL to spread the cost of her $ 400 wedding shoes. “They really tied the dress together,” she says. “If I ever have a daughter, she will have them.”

“It was a great solution and great service in my situation considering everything was last minute,” says Broward.


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