With the digitization of payments, buyers no longer have to pay immediately from their bank accounts. Several online payment options allow one to buy and pay for a product flexibly. The “buy now, pay later” option is one such feature. Here, consumers can pay for a purchase later without any interest charged. Loan approval for BNPL is also quicker. But there are some mistakes one should avoid while availing of this option:
1. Buying expensive products
With “buy now, pay later,” it is easy to get carried away and buy expensive products that one cannot normally afford. For example, high-end laptops or electronic items may cost over $1,000. One can easily buy these products with the buy now, pay later option, but when it is time for payment, one might face a major financial crunch. Also, there are additional charges for late payments, which can eventually increase one’s spending. So, a better idea is to plan expenditures well in advance and save money before buying something costly.
2. Taking too many loans within a short time
Many people use “buy now, pay later” to buy multiple products. But as the number of transactions increases, one’s debts also increase, which can be overburdening when they have to be repaid. Also, it is difficult to track the last payment date for each transaction. For this reason, one should use this payment option only for a certain number of transactions every month.
3. Failing to pay on time
It is easy to forget to make “buy now, pay later” payments on time because it is not always monthly; it may also be on a weekly or biweekly basis. With late payments, one would have to pay additional fees as a penalty, which can increase the amount spent. Multiple late payments can cause a huge financial crunch in the long run. Late BNPL payments can also affect one’s credit score.
4. Neglecting to check the bank’s dispute regulation policies
Unlike with credit cards, consumers using “buy now, pay later” are not protected by regulations in case of billing errors or product quality problems. However, individual authorities offering “buy now, pay later” may have regulations to resolve such consumer issues. So, before opting for BNPL, one should check individual policies governing billing errors and product quality.
5. Missing out on reading terms and conditions
All services have their own set of terms and conditions, informing one about payment rules, penalties, additional charges, and so on. Similarly, different retailers may have their own rules for buying now and paying later. It may be a boring task to read these documents, but failing to read the terms and conditions can cause financial problems later. Thus, it is best to check related documents and ask any questions to the bank’s customer care beforehand.
6. Not setting a budget
Making all payments through BNPL is not a good idea because it can cause overspending and high interest rates. To avoid this situation, one should set a fixed budget for BNPL and not exceed it per month. This budget should be calculated considering factors like income and all other expenses.
7. Buying on an impulse
Impulsive buying is common with “buy now, pay later” because one does not have to pay immediately. But with impulse buying, one may end up buying products that are not needed, which become white elephants in the long run. Before making a buying decision, one should consider whether the product is really of personal value. It is also essential to check if there are alternatives that fulfill the exact requirements at a lower price.
8. Lacking a clear understanding of buy now, pay later
Buy now and pay later may seem similar to traditional EMI loans, but they are actually very different. Retailers usually offer BNPL options to customers, allowing them to buy products and pay a large portion of the amount later with no interest charged. So, it is a short-term financing option for consumers. On the other hand, installment loans, such as EMIs, are offered by banks and financial institutions, and these payments can be made in installments with interest rates. Before using the option, one should read up on “buy now, pay later” and understand how it works.
9. Not analyzing payments regularly
Just like checking one’s credit card statements gives an idea of where one’s money is being spent, analyzing “buy now, pay later” payments can help better understand one’s buying patterns. So, it is vital to check what payments one has made using “buy now, pay later” every month, what payments were unnecessary, and what can be easily paid through other means. This way, one can organize finances adequately for each month and ensure timely payments.
10. Not checking store-return policies
Every retail store may have different return policies, and there may be specific policies for those using the BNPL option. For example, some retailers may allow one to return the product, but they may not be able to cancel the BNPL payment without providing evidence that the store has agreed to and processed the return. One should inquire about such store policies before using “buy now, pay later” to buy products.
“Buy now, pay later” is a convenient option for buying different products. Most retailers now offer “buy now, pay later” to provide their consumers with payment flexibility. Understanding this mode of payment well and making timely payments can help one maximize its benefits.