Buy now and pay later

Let’s talk about shopping; Black Friday is the year’s biggest shopping day. If you are frugal, you already have your shopping done by now. However, most people like to wait till the holiday to do their shopping to get more bang for their buck.

If you already have your Christmas list together, then you should have been able to put money aside for your gifts. However, if you haven’t put money aside for your holiday shopping then more than likely, you plan on putting all your gifts on your credit card.

For many years these were your options when it came to shopping. Yet, in recent years there has been a new option that many of us have been utilizing. The buy now and pay later option. Since we no longer have the option of layaway (where you put money down on products and make installment payments tell they are paid off,, and you can take the products home). Many stores are welcoming the buy-now option for those of us who are unable to pay in full.

Today I want to give you my pros and cons of using buy now pay later. n addition, I would like to provide you with when you should use this option and the best way to do so.

What is Buy-Now Pay Later

Like layaway, you can make small installment payments over a period of time tell the item is paid off in full. However, unlike layaway, you can take the item(s) home while you make your payments.

Like a credit card, you make the first payment when you are buying the item. Yet, unlike a credit card, some buy-now-pay-later apps do not have added interest. So you are paying just the cost of the item(s).

Example:

If you buy a laptop that is $600 and you make 4 monthly payments of $150 then your total is $600.

You can also make smaller payments or installments for a more extended period of time and still just pay the total of the item without interest.

Example:

You buy a laptop that is $600 and you make 12 monthly installments of $50. After 12 months, your overall payment is $600.

However, not all buy-now, and pay-later apps work this way some will charge you interest just like a credit card or a loan.

Example:

You buy a laptop for $600 you make 4 installments of $155. Your total at the end of your payments is $620. You paid $600 for the laptop and $20 interest.

The Pros

Approval- more people are able to use these apps than, being able to get approved for a credit card.

Credit check- most of the buy-now-pay-later apps do what they call a soft pull to your credit report. What that means is they don’t hurt your credit score. Most credit cards do a hard pull which does hurt your credit score.

Credit Building- some apps report to your credit report. This allows you to use them for credit building just like a credit card would.

Rewards- some apps reward you for paying off your account. Let’s,, say you started with being able to spend $200 and you paid off your items and you want to make another purchase through the app you are now able to spend $300 this time.

Affordable – buy-now pay- later, apps make your payments affordable and some allow you to pick your payment. Doing this makes it easy for more people to be able to get the things they want.

Any Store- Buy-now pay-later can be used at every store you can think of. From Amazon to Home Depot, many furniture stores have their own buy-now-pay-later options.

Cons

Expense- because you are not paying in full, you’re adding an extra expense to your budget each month until the item is paid off.

Overpaying- If you are using an app that adds interest then you are paying more for paying in installments than just buying the item straight out.

Bad Habit- if you are not good at budgeting and have a spending problem, this can lead you to significant financial issues.

Debt-if you are trying to live a debt-free life nine times out of ten, this is not a tool you want to use because it goes against the debt-free rules. For example: only buy what you can pay in cash, and if you”re going to stop using credit cards, this has the same effect.

Bad Credit- some apps can report to your credit if you start owing them for not being able to make your payments. They can report missed payments or put the unpaid amount on your credit report as bad credit.

Using buy-now and pay-later

Now I am not one to tell people what they should and shouldn’t do. However, this is my advice on how and when you should use buy-now-pay-later apps.

  1. Start with just one app or store program. You don’t want to be owing three or four different apps at a time.
  2. Find one that works with your budget and lifestyle. Look at what you buy and where you shop.
  3. Start small, the objective for this payment option is the more you buy the higher the loan they will give you. Do this by building credit through the app over a long period of time.
  4. Make a habit to pay your loan agreements early. This can save you money sometimes you get a discount for an early payoff.
  5. Never mix out your spending amount. Just like a credit card you only want to use 30% or lower. If you use the full amount and need to buy something else, you will have to find another app or store. This can get you into financial trouble.

If you are in deep financial debt,, I would think really hard about using any of these apps till you get your finances in order.

Well, that’s all that I have for today, I hope this helps you on your journey.

Thank you for reading Everything Frugal.

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