Buy Now, Pay Later

There’s a new acronym in town. BNPL stands for “Buy now, pay later,” and it’s totally different from traditional credit. 

You may have seen some new logos popping up next to some products in online stores — names like  Affirm, Afterpay, and Klarna. These BNPL companies offer point-of-sale installment loans that people pay back at a future date. 

People with credit cards may not see how this trend applies to them. It’s dependent on the store you’re in. Like everything else in life, the terms of a BNPL loan are governed by your credit — so why not use a credit card?

If you have good credit, you can obtain BNPL loans with 0% interest. For example, if you’re intending to buy some new outside furniture and there is a link for BNPL financing, you could sidestep the interest attached to your cards by buying now and paying later. 

Of course most good things have some bad attributes mixed in. Surveys have shown that it is easier for people to spend more money when using BNPL financing. Additionally, BNPL platforms often charge exorbitant interest to the less creditworthy, and missing payments will negatively affect a person’s credit — even though on-time payments do nothing to improve a person’s credit. Finally, there’s the issue of returning things that were purchased with a BNPL plan. Returning an item does not automatically cancel the loan.

I’ve written before about how credit is often paired with deceptive promotions that target people’s emotions. It’s all about psychology. The instant gratification of receiving something now and not having to pay for it right away is a key component of the American Dream — but owing money is something that should be done with forethought and purpose. At least at JHA! Contact us to talk about your debt situation.