Dangers of buy now, pay later

Buy now, pay later (BNPL) services are becoming very popular at checkouts all over our favourite websites. These services allow avid online spenders to break up or delay payments on their purchases, ensuring that you’re not dropping a ton of cash at once. Companies such as PayPal Credit, Klarna, and Clearpay are making it super easy to buy now and pay later.  Yes, this sounds amazing (trust me, we know) BUT with anything financial, there will always be fine print. So read on to find out more about the dangers of BNPL. 

Tempts you to make unnecessary purchases 

Spacing out payments sounds like a relief to your bank account, however, this also increases the temptation to overspend. Whilst the temptation is there to literally buy anything you want, it is important to sit back and re-evaluate your decision without giving in to your impulses. 

When you see those trainers, watch or whatever else you’ve had your eyes on at full price, you’re more likely to reconsider and think about it more. However, when it’s split into instalments / is postponed for later payments, you’re instantly more tempted to buy. At the end of the day, you’ve still spent that large amount of money, you’re just left playing catch-up. 

Missed payments = costly consequences 

There’s no denying that BNPL works wonders if you make all your payments on time. Usually, you won’t face those extra charges and interest fees, and your credit score will remain positive. However, IF the special arrangements (the ‘fine print’) aren't met, things can get very stressful and ugly. You can be left paying late fees, interest charges and negatively impact your credit score. 

Things can spiral out of control

When using BNPL services, you’re leaving yourself in a vulnerable position financially and things can get out of hand very quickly. 

BNPL encourages unplanned spending and impulse shopping which places you at a disadvantage in your financial journey. Chances are the impending deadlines to make repayments will also add to your stress levels in your life. 

When facing unexpected financial circumstances (like loss of job or illness) you may face trouble keeping up with the repayments which in turn could lead to spiralling debt. 

However you decide to pay for your purchases, it is important to have an honest conversation with yourself about your financial situation, before you actually commit to these finance services. Two key questions to ask yourself are: 

• Can I afford this?

• Will I be able to make the repayments on time? 

The following is for general information and is not intended as a form of financial advice by Finndon or it’s representatives, nor the information intended to be relied upon by individuals in making any financial decisions.