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September 28, 2023

Buy Now, Pay Later is Debt

It’s the end of September, and the holidays are creeping up a lot faster than you think. But wait! Before you panic and start buying all those gifts you need, it’s worth the time to think about how you will pay for them.


Buy Now, Pay Later (BNPL) is a popular alternative to credit cards these days, and let’s be honest…it sounds pretty good. It’s often easy to use and doesn’t charge interest.


But not everything is at it seems. Even without the interest rates, BNPL is actually a short-term loan. In other words, it’s debt.


Here are four things to watch out for when using BNPL:

  1. BNPL leads to overspending. BNPL lets you buy pricey items and pay them off over multiple installments. That means the initial investment looks quite cheap. It’s easy to misjudge and purchase something you can’t afford. Do this with multiple purchases, and you quickly end up in a hole with a lot of short-term debt.
  1. It’s easy to lose track of BNPL purchases. The simple BNPL apps and plug-ins on many sites make it easy to lose track of purchases. There’s less effort and thought involved when paying, meaning you don’t watch it as closely. This situation ties into point #1, leading you to spend more than you can afford.
  1. Many BNPL services have late payment fees. Like other lenders, BNPL providers expect you to pay on time. Did you lose track of all those cheap-looking payments? Tough luck. You’re probably looking at paying more for your loan than you first expected.
  1. BNPL can affect your credit score. Not too concerned about those unpaid installments or late payments? Your credit score might take a hit. BNPL providers send tardy borrowers to collections. A collector can report your non-payment, ultimately lowering your credit score.


BNPL can be a great tool, but make sure you’re aware of the above warnings while you shop. And if you want a more transparent way to track your purchases, start with a credit card.

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