Everything You Need to Know about Buy Now, Pay Later
A lot has been said recently about buy now, pay later schemes. While some defend that the schemes allow people to divide the costs in an interest-free way, others are worried that it opens the door to taking on debts. But what even is buy now, pay later? And is it safe to get into one? Read on I will let you know everything you need to know!
What is Buy Now, Pay Later?
Picture it for a second: it’s the holiday season, COVID restrictions have been lifted and you can’t wait to get away for a week and enjoy your holiday abroad. You click on the purchase button and you see a “Pay in 30 days” option. You end up realising that your tickets are going to cost you slightly more than you expected and that button starts to look appealing… but is it too good to be true? what are the terms and will it cost you more in the end?
Buy Now, Pay Later means exactly what you would expect- you get to purchase something and pay at a later day. Typically 30 days after the date of purchase, but it can extend to 12 months depending on which scheme you sign up for. It is known as an easier way to access credit, as it is interest-free and allows an affordable and easier way to manage your payments. Sounds lovely and stress-free right? So why has there been some much controversy about it?
What’s the Catch?
The reason behind the controversy is that there are some drawbacks that you need to be conscious about. I briefly mentioned that it can invite being in debt because it’s easy to access and it’s tempting to go overboard on the number of purchases you make on what is essentially credit. This also means that it can have an effect on your credit score which is important to keep in mind for your future especially if you’re thinking of getting a mortgage. So, does this mean that you are better off not getting involved? Not so fast! Here are some things to keep in mind to responsibly use this service:
Important Pointers to Keep in Mind
Don’t miss your payment dates
Seriously don’t! This is how you end up hurting your credit score and messing up your chances of financial stability in the future because many of the schemes available charge interest when you miss your payment date. So, make sure that you keep the date written down. Maybe set an alarm to remind you and set that money aside in your savings account as soon as you get paid so you don’t end running empty when it’s time to pay.
Don’t buy more than you can chew
This one should be obvious, but don’t buy excessively. Although most of these companies will check your credit and make sure that you qualify before you can use their services, this is not a guarantee that you won’t be buying more than you can afford. Your credit might say that you are well financially but the number of items you purchase might catch you by surprise and end up taking more money from you than you imagined and easily lead to debt. Remember to purchase responsibly and use these options sparingly and only as needed.
What You Should Take Away?
So there you have it. Everything you need to know about Buy now, Pay later in a nutshell. Now you have the tools you need to make an informed decision. Remember: these schemes are useful and offer a good alternative to more standard credit, yet they need to be used carefully in order to avoid their drawbacks.
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