Think About Your Financial Well-Being First
You may have heard or seen "Buy Now Pay Later" (BNPL) options when purchasing items online or in person allowing you to enjoy your purchases as soon as possible. Here's how BNPL works: customers purchase products immediately and defer payments over time. Your total purchase is divided into equal payments or installments. It's a way to manage cash flow and divide high-cost items into manageable amounts. The appeal is real. Initially this sounds good, but you are still getting into debt and taking on the risks associated with debt. Here are things to think about when considering a BNPL plan:
- Look for zero-interest plans and watch out for plans that may charge interest and fees.
- You do not need a credit score to use these types of plans. That can be good for those with no or low credit scores. But be aware, these payments are not reported to the three credit bureaus, so you are not establishing a credit history for your future.
- They are becoming readily available at major retailers at check out which can be convenient. But this convenience can easily turn into overspending if not careful.
- Some plans have limited customer service options. So, if you have concerns or questions, it may be difficult to get resolution.
As an alternative to BNPL plans, a credit card may be better. By paying your credit card responsibly, you may be able to earn rewards with your purchase, build your credit history over time, and have additional protection because the credit card industry is carefully regulated. Be cautious if you do use BNPL. Make sure it is for necessary items such as a computer or refrigerator that has a long life, not every day needs such as food and clothing. These plans if not used carefully can quickly turn to financial difficulties. Read the Fall 2023 edition of InTouch
here.
