Should you buy now and pay later?
It’s easier than ever, and there are now tons of companies and apps that allow you to spend money quickly without worrying about an immediate hit to your bank account. You may have heard of some of these companies: Affirm and Klarna are among the largest.
During the pandemic, many people were introduced to a new way to ‘leverage’ their spending. Though many people have been warned against using credit cards and their high interest rates, “buy now, pay later” options give you the luxury of getting something today that you technically cannot afford.
You’ve likely seen “buy now, pay later” options all over the internet. It makes it easy to get what you want, fast. But in effect, is it different from using a credit card?
As a financial literacy advocate, I find the entire concept intriguing. On one hand, kudos to marketing people for developing another enticing, yet confusing, way to make a purchase! On the other hand, shame on those people for presenting another enticing, yet confusing, financial literacy conundrum!
While buy now pay later options may be useful for some people, and under certain circumstances, I think it’s best to take a number of things into consideration before putting it to use.
Buy now, pay later: Things to consider
Before the marketing hype of free money blinds you, please do a couple of things for me:
- First off, only use buy now, pay later options for necessary expenses, not splurges. These are dollars you are saying you do not have today, that is not an agreement you want to make on something you do not absolutely need.
- Confirm there are NO interest charges. While many of the shorter-term plans do not have them, some can be just as high as traditional credit cards.
- Confirm that there are NO late fees. Do not want one mistake to create a string of mistakes.
- Confirm what type of credit check is required. No one will give you a loan — which this buying option technically is — without knowing your trustworthiness or credit score. If it is a ‘Soft inquiry’ it will not impact, but a ‘Hard inquiry’ will ping your credit score.
If you have seen the warnings, confirmed the offering is legit, and still want to move forward with your purchase, just understand this tactic of delaying payments is a slippery slope to overspending. If you do not keep close track of all these deferred payments, you will wake up one month and realize that you may not have enough in your account!
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