5 Signs You’re Overusing a Buy Now, Pay Later Plan

Buy now, pay later (BNPL) plans are similar to reservation systems with one big advantage. This means you don’t have to wait to pay to get your items home. Rules vary depending on the lender, but generally you pay about a quarter of the purchase price at settlement and then you can take the item home. The remaining amount will be repaid in three installments over the next six weeks.

These plans can be a great alternative to credit cards because there is usually no interest if you keep making payments. But the old saying that there is too much of a good thing applies here. Relying too heavily on BNPL schemes can cause problems in the long run. Here are five signs you might want to reduce your BNPL usage:

1. Use BNPL for living expenses

Although it is possible to use BNPL for small, everyday objects, it is not really its intended purpose. BNPL is supposed to provide short-term financial assistance to help you pay for big-ticket items that you can’t purchase on your own. It shouldn’t become a habit.

2. A lot of late fees are incurred

Ideally, you want to make all BNPL payments on time to avoid incurring late fees. Sometimes you might accidentally forget one, which may not be a big deal. However, if you are habitually late on payments or skipping payments altogether, this is a sign that using BNPL may not be sustainable.

3. Taking on debt to repay BNPL items

If you take out a personal loan or borrow money from someone else to pay for BNPL items, it may be a good idea to consider taking a break from purchasing for a while. Wait until you pay off everything you currently owe before buying more.

4. Hide your BNPL purchase details from others

Some frequent BNPL users may feel guilty about the amount they purchase, so they try to hide their BNPL purchases from others. This can be especially harmful if one spouse is hiding BNPL debt from the other.

5. Causes stress

Keeping track of multiple BNPL payments can be stressful, especially if they all have different due dates. If you’re anxious about juggling everything, it may be a sign that you need to slow down your purchases or find another way to finance your items.

Alternatives to buy now and pay later

If your BNPL service is causing you any of the above issues, it may not be the best way to finance future purchases. Here are some other options to consider:

save money

Saving for a purchase will completely eliminate your debt. However, this sometimes means you have to wait until you have enough cash. This may not be desirable, or even feasible if you are in a financial emergency.

Credit card

Credit cards allow you to pay for purchases over time, similar to BNPL services. However, if you don’t pay off your balance in full at the end of the month, you may be charged a large amount of interest. However, there are credit cards that offer 0% introductory annual percentage rate (APR) to new customers. If you’re financing a single large purchase and are confident you can pay it off before the 0% APR period ends, one of these may be right for you.

personal loan

Personal loans allow you to borrow money without putting up collateral. Because of this, interest rates are higher than on car loans or mortgages. However, you will receive predictable monthly payments. However, it takes longer to get approved than with BNPL services.

Evaluate all your options before deciding on the best way to finance your purchase. Keep in mind that the right choice now may not be the right choice in the future. It’s okay to change things up as long as you understand the financial implications of your decisions.

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