Pros and Cons of Buy Now Pay Later

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With the onset of the Covid-19 pandemic, people turned to online shopping more than ever. That is why the Buy Now, Pay Later (BNPL) program became all the more popular. It gives the buyer, which is you, the option to pay for the purchase in installments (mostly interest-free)! However, even though it seems to be simple and hassle-free, but if you can’t manage your financial situation, it could lead to serious problems.

What are the Pros and Cons of Buy Now, Pay Later?

Pros:

  • It helps to split up the payments, which comes in handy if you buy costly merchandize. Since you don’t have to cough up a lump-sum, it makes the item more attainable.
  • It isn’t like applying for a credit card, so qualifying for Buy Now Pay Later is a cinch! It means someone who is new to credit or lacks a strong credit profile, might find it easier to make a purchase this way.
  • This type of option is convenient and quick. Online shoppers in particular, may find the immediate gratification of buying what they want in easy-to-understand terms a preferable way to shop. The payment options are built in with several online retailers, so it takes just a few seconds!
  • Since you pay in installments, it helps to manage cash flow. Thus, you can buy what you want at a payment plan that fits your budget.
  • Most Buy Now Pay Later plans are interest free. If you can pay off the balance on time, it is an excellent deal. Not only do you receive the purchase right away and pay for it over time – and you won’t have to pay any money in interest.

Cons:

  • The terms of the deal must be understood properly. Before you commit to such a payment plan, it is necessary to know the terms. For instance, 0% interest might not be applicable throughout. If you fail to pay off the balance in full before the promotional period ends, interest will be imposed on your account from the original purchase date, which can be very expensive.
  • Just like the point discussed above, you can not only incur interest but late fees too. If you forget to make a payment or have insufficient funds in your linked bank account, they could be charged as late fees. Many are reasonable flat-rate fees in line with those assessed by credit cards, but these fees can add up over time, so paying on time is the best way to avoid extra charges.
  • Buy Now Pay Later programs are convenient, but they don’t help with your credit. Most payments aren’t reported to credit bureaus, so you can’t build a positive credit history. On the other hand, late payments might be reported and have a negative impact.
  • The ability to pay off an item over time can make the purchase seem affordable. However, if you don’t plan properly or buy too many items, your finances can spiral out of control.
  • Returning an item you bought via this plan can get complicated. Yes, you definitely get back the money you already paid, but there could be a delay until the merchant and third-party company (the one offering the BNPL) processes the transaction. You might have to keep on making payments in the meantime. If you don’t, the payment might be marked tardy or missing, and then you could incur fees.

Remember that all Buy Now, Pay Later programs aren’t same, as each third party company offering it has its own terms and conditions. Make sure you understand them, and proceed with caution.

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