Buy Now Pay Later: Is It Worth It?

These days, a lot of us are looking for easy ways to save money without making big changes to our spending habits. One option that is gaining popularity are “Buy Now, Pay Later” services. They let you buy what you need right away but spread the payments over time. This allows you to pay for purchases, especially bigger ticket items because you do not have to pay the cost upfront. Sounds convenient, right? But before you start spending away, it is good to know the pros and cons of Buy Now, Pay Later services and if it can affect you in the long run.

What is Buy Now, Pay Later?

With Buy Now, Pay Later, you can buy items upfront and break the cost down into smaller, easier payments. This can be managed by a third party, such as Affirm, or directly with the retailer. Usually, the payments are split over a few weeks or months, with the first one due at checkout. The payments are often taken automatically from your debit or credit card, so you do not have to worry about missing them. If you are shopping online and the e-commerce website you are shopping from offers a Buy Now, Pay Later option, you will most likely see it on the product page. When purchasing in-store, you can ask a sales associate if they have the option. Buy Now, Pay Later can sometimes be marketed as “paying in installments” or financing, as some retailers will charge an interest fee on top of the original price.

How Buy Now, Pay Later Works

Before you pay, you will get an idea of how much you can expect to pay and for how long. When buying online with Affirm-supported retailers, the interest rate can be anywhere from 0 to 32% annual percentage rate (APR). If you are using the Buy Now, Pay Later service with Affirm, you will usually have two options for payment depending on the store. You can either make four payments every 2 weeks, which could be great for everyday purchases. These smaller purchases with Affirm usually have no interest or fees because the cost of the item is lower. But you should double-check to see what the terms are for the retailer you are shopping with, as they could be using another third-party service with different terms. With bigger ticket items, like electronics, your option will probably be to pay monthly installments. For example, a phone that costs $1,129 could have a Buy Now, Pay Later option of $51.05 a month for 24 months, at a 7.99% APR. In the end, it will cost you $1,225.25 for the phone. All this information will be listed on the page so you know exactly how much it will cost.

How to Use Buy Now, Pay Later

To use Buy Now, Pay Later, just select it as your payment option when you are shopping online or in-store. The company will do a quick approval check, which usually only needs basic info and a soft credit check (so no impact on your credit score). Once you are approved, you can pay for your purchase in installments, usually four payments every two weeks or monthly. Some services even offer interest-free plans, but watch out—if you miss a payment, you might get hit with interest or late fees. Make sure to read the fine print because once you buy, the terms are locked in. Most Buy Now, Pay Later companies do a soft credit check, but some may run a hard check, which can temporarily drop your credit score by a few points. And while they do not always report your payments, missed or late payments could end up on your credit report, potentially affecting your score. If you are concerned with how it can potentially affect your credit, be sure to double-check with the company ahead of time so you are not hit with anything unexpected.

Benefits of Using Buy Now, Pay Later

The main benefit of Buy Now, Pay Later is payment flexibility. By spreading payments over time, consumers find it easier to budget and manage cash flow, especially for larger purchases. Consumers can enjoy products immediately without needing to pay the full price upfront. This could be a good option for those with a tighter budget but need to purchase something right away, for example, if your laptop breaks and you need it for school. Buy Now, Pay Later allows you to buy a new laptop even if you do not have the money for the entire purchase at that moment. If the service provider offers interest-free payment plans, consumers are also able to avoid interest charges that would come with credit card debt. The quick and often lenient approval processes make Buy Now, Pay Later accessible to a broader range of consumers, including those with limited credit history.

Risks and Drawbacks of Buy Now, Pay Later

While Buy Now, Pay Later services can be convenient, they can also lead to some challenges if not used responsibly. If you are someone who tends to overspend, the convenience of Buy Now, Pay Later might make it easier to splurge on things you do not really need. If you are not keeping a close eye on due dates, it can be easy to miss a payment, which could lead to more financial stress. Even though many Buy Now, Pay Later services say they are interest-free, there can be hidden fees, like late charges, that add up fast if you are not careful. What seemed like a small payment plan could turn into a bigger expense than you expected. You should double-check to see what the terms are and do your research first. Some third parties like Affirm do not have hidden fees or charge late fees, but many others do. Another thing to watch out for—while most Buy Now, Pay Later providers only run soft credit checks, missing payments can still hurt your credit score, which is definitely not ideal if you are working on building or maintaining good credit. Unlike credit cards, Buy Now, Pay Later does not always offer the same level of protection against fraud or faulty products, so be cautious when making purchases.

Pros and Cons of Buy Now, Pay Later

Thinking about trying Buy Now, Pay Later services? Let’s break down the pros and cons to help you decide if it is a good option for you when you are shopping!

Pros:

• Get it now, pay later: You get your products right away, even without paying the full price upfront.
• Flexible payments: Spread your payments over time, making it easier to fit into your budget.
• No interest (sometimes): Some plans do not charge interest if you pay on time!
• No late or hidden fees (sometimes): Some providers will not charge you late or hidden fees, so what you are expected to pay is what you will pay. Be sure to double-check first!

Cons:

• Impulse spending: Having instant access might tempt you to buy things you do not really need. This can lead to more credit card debt.
• Potential fees: Miss a payment? You might get hit with late fees or other hidden costs.
• Credit impact: Missing payments can affect your credit score, which might hurt your ability to borrow in the future.
• End up paying more: For larger ticket items, you will probably need to pay interest fees on top and you will end up paying more than what the item originally cost.

Making the Right Choice

Before diving into Buy Now, Pay Later, here are a few things to keep in mind:

• Check your budget: Can you handle the payments without stretching your finances too thin? Will you have to dip into your savings to make this purchase?
• Know your spending habits: If impulse buys are your thing, Buy Now, Pay Later might not be the best option as it will continue to feed your spending habits.
• Read the fine print: Always check the terms, including payment schedules, fees, and penalties.
• Watch your credit: Make sure you understand how Buy Now, Pay Later could affect your credit score, especially if you are planning any big purchases soon.
• Note down your payment dates: Mark down when you expect the payments to come out of your account to ensure that you have enough funds available. The last thing you want is for payments to bounce and additional fees to tack on.
• Plan for surprises: Life happens! Make sure you have a buffer for unexpected expenses that might interfere with your Buy Now, Pay Later payment plans.

By considering these factors, you will be in a better position to decide if Buy Now, Pay Later fits your financial goals and lifestyle.

Farber’s Insights on Buy Now, Pay Later

Thinking about using Buy Now, Pay Later? These services offer great flexibility, allowing you to get what you need right away. But as convenient as they are, it is important to stay aware of potential risks like hidden fees and the possibility of accumulating more debt. Here are a few tips to help you make the most of Buy Now, Pay Later without running into trouble:

• Watch for hidden charges: Interest rates and terms can change unexpectedly, especially in uncertain economic times. Keep a close eye on your account for any surprise fees that might pop up.
• Stick to well-known third parties: Consider only using Buy Now, Pay Later with retailers that use well-known third parties such as Affirm, which does not charge hidden or late fees.
• Pay off your balance quickly: To avoid falling into debt, aim to pay off your balance as quickly as possible. If you can, make larger payments or clear the entire balance to dodge extra interest.
• Stick to your budget: Buy Now, Pay Later can make it easy to overspend. Be sure to budget for your purchases and make sure your bank account can cover any automatic withdrawals. Keeping track of your spending is key.
• Avoid overspending: While Buy Now, Pay Later offers instant access to products, it can also tempt you to buy more than you can afford. Stick to your budget and avoid impulse purchases to prevent falling behind on payments and accumulating debt.

How Farber Can Help

If you are struggling with managing your finances or find yourself dealing with more debt than you can handle, Farber is here to help. We specialize in guiding individuals through their financial challenges, offering practical solutions to resolve debt and get them back on track. At Farber, our experienced team works closely with you to:

• Review your financial situation in detail
• Help you develop an affordable, realistic strategy to pay down your debt, get on track with a budget, and stop overspending
• Offer solutions such as consumer proposals or debt consolidation plans
• Provide ongoing support as you work toward financial recovery

Whether you are feeling overwhelmed by your Buy Now, Pay Later payment or any other debts, we are ready to help you regain control. Book a free consultation today, and we will help you build a plan to get out of debt and get back on track to financial stability.