Buy Now, Pay Later: The Good, the Bad, and the Ugly

Buy Now, Pay Later: The Good, the Bad, and the Ugly

Click the link above to read the full article. The article was published on October 12, 2022.

The author is Chris Butsch of the Money Under 30 blog. As per Chris's bio, in addition to publishing personal finance advice, Chris speaks on the topics of positive psychology and leadership

Most of us have likely been there before, you are online shopping, at the final check out and the site gives you the option, instead of paying for it now, make equal payments over a number of months at 0% interest! Why not? It is probably the smart thing to do. But consumers are onto this as Chris points out - but are they really? 

Our generation is smart enough to know that 0% APR financing is a trick or a trap of some sort. But we’ve gotten this far… times are hard, money is short, and we could really use that interest-free financing on our new Peloton.

Never heard of the Buy Now, Pay Later option? You would be surprised at just how big it is then.

How popular are we talking? Well, as of March 2021, over 61% of 18- to 24-year-olds said they had used a BNPL service. Just one year earlier, that number was closer to 38%. Not only that, but the global buy now pay later market size was valued at a whopping US$132 billion in 2021, with North America accounting for about 30%, or $39.6 billion, of those sales. Even more, BNPL worldwide is expected to grow to a mind-bending US$3.68 trillion by 2030.

In theory, it could be a great deal and completely worth it. If you can keep more money in your pocket, make every payment on time and won't need to return it, maybe it makes sense. The risk more often then not is probably not worth it though.

‍Should You Use Buy Now, Pay Later Services? Not unless you need to. In 99% of cases, it’s just not worth risking: Your credit score, Late fees, 30% APR, stressful return process, Accidentally buying something you can’t afford.

Are there times where it may make sense? 

Avoiding credit card debt. If you put a $1,500 Peloton on your credit card and can’t pay it off at the end of the month, you’ll be immediately hammered by your card’s regular APR. At least with BNPL, you get temporary 0% APR financing. Stretching a big purchase across multiple monthly budgets. Similarly, if you only allow yourself $500 monthly on nonessential purchases, stretching your $1,500 Peloton across three months may help with budgeting.

We might argue that first one. If you cannot afford the purchase, it may be worth delaying it until you can.

Next time you are tempted with the Buy Now, Pay Later option at checkout - give it some thought first.

The article linked and mentioned above was published on October 12, 2022 and written by Chris Butsch. Check out more from Chris here. Check out the Money Under 30 Blog for more great personal finance articles.