Buy Now, Pay Later (BNPL) is a financial product that allows customers to split up the cost of their purchases into installment payments that are typically due every two weeks. A survey from Affirm found that 56% of Americans say that they are interested in using BNPL for holiday shopping and 69% of Americans believe that BNPL can help them budget more responsibly.
With BNPL, customers can shop for their holiday gifts and book vacations while paying at their own speed. Shoppers have access to almost 12,000 merchants to choose from. This gives those merchants the tools for potential growth by allowing more customers the opportunity to shop with them.
What can you buy?
From engagement rings to planning your dream vacation, or even treating yourself to expensive workout equipment, the possibilities are endless. If these options are out of your budget, you can also consider purchasing makeup, clothing, or even essential items. BNPL gives you the opportunity to find the perfect gift this holiday season.
If you're someone who is interested in using this payment method here is how to use it responsibly.
- Make your payments every month or two weeks and pay more if you can.
- Set a budget or spend limit for yourself! Just because you have the ability to spend $2,000 on something you have to make sure it is a wise choice for you and your wallet.
- Make sure you can afford what you're buying: Many people overspend during the holidays and while it is exciting that you can book a week-long trip to Fiji with BNPL, double check that it is still in your budget.
- Make sure you are okay with potentially a long time to pay off a purchase if you spread out the payments.
While it is convenient and easy to use, there are a few things to be aware of when using BNPL:
- Pay close attention to the return instructions: When you use BNPL you pay through a provider such as Afterpay, Affirm or Klarna, they pay the merchant in full for you while you make the payments every two weeks to the provider. This means when you make a return, the money goes to the provider instead of you, which can create a wait time to get your money back. Due to this wait you can continue to pay the provider for a returned item. Each provider has a different refund process and timeline so make sure to research it before you decide to use BNPL.
- Look closely at the fees: Some BNPL providers don't clearly disclose fees or changes to terms of service. Fees can vary from a small amount to as much as 25% of the loan value. Make sure to closely review the interest rates and late fees before making a purchase.
Buy Now, Pay Later is perfect for holiday spending and getting your loved ones that perfect gift but make sure you can afford it and read the fine print before you commit! Happy holiday shopping!
NMLS #407985