There are four little letters that can cost you a lot if you aren’t careful —BNPL.
There are a lot of ways to Buy Now, Pay Later (BNPL) from traditional credit cards to web-based offers like Affirm and Klarna.
The concept behind all of them is similar: You can buy what you want now and worry about paying for it later. It’s quick and convenient!
Unfortunately, that convenience can come with a hefty price tag, even for inexpensive items. Here’s why, and some tips on how you can avoid the convenience trap!
Late fees and interest. Sometimes services like Affirm and Klarna, which appear when you’re completing your purchase through a website, say they’re interest-free. But, they may come with a "service fee" or late fees, or interest on payments that are late or extend beyond the initial deadline. Read the fine print and make sure you pay on time to avoid these fees!
Impulse purchases. When you don’t have to pay for something now, it’s a lot easier to go ahead and click the ’buy’ button! After all, you can worry about paying for that coveted item later, right? But when it’s super easy to purchase something, your impulses may get the better of you and add up without you even noticing.
One way to avoid this? Leave something in your online shopping cart for 24 hours before you purchase it. If you really still want it, figure out how to pay for it before you compete the purchase. (Using only funds you have budgeted for such purchases, or using your debit card, is a good idea!)
Credit score hits. Some BNPL services do report you to credit bureaus or do a quick credit check before approving you for a payment plan. Those can negatively affect your credit score over time, so be judicious about using these services.
Want to avoid the traps of BNPL? In addition to the tips above, you have lots of better options, including the protections offered by your CommonWealth One Visa debit or credit card.
If you find yourself in debt from overspending, come talk to us! We’re happy to match you up with a certified financial counselor who can talk to you about your budget, spending, savings and ways to get it all under control. After all, your money should be working for you!
We look forward to seeing you soon at CommonWealth One!
