On March 28, the world’s largest company threw its hat into the BNPL ring with the debut of Apple Pay Later.
For many cash-strapped families whose grocery bills have outrun their budgets, it got here just in the nick of time. Just six days earlier on March 22, Adobe Analytics released a study showing a 14% year-over-year increase in purchases using BNPL, with surging online grocery spending driving much of that growth.
“Seeing more consumers turn to BNPL services for everyday purchases, such as groceries, could mean they’re struggling financially,” said Laura Adams, MBA, a personal finance expert with Finder.com. “BNPL is a short-term financing option for paying over a period, such as four or six weeks. However, it’s typically interest-free. For some consumers, that could be a more attractive option than racking up high-interest credit card debt.”
The Adobe study leaves little to read between the lines. More people are paying for groceries with BNPL because they can’t afford to pay outright, and — as Adams said — interest-free payments make more sense than credit cards.
“Using these buy now, pay later programs means splitting your overall grocery cost into four equal payments, typically paid over the course of six weeks,” said Julie Ramhold, consumer analyst with DealNews.com. “Obviously, that can mean turning something like $120 into a $30 payment while still being able to take your groceries home right away. If you’re pressed for cash, this can be a great way to make sure you’re able to buy necessary items like food without having to worry too much about your funds.”
BNPL can buy you time when money is tight. But if you can’t afford basic expenses like groceries today, what will happen in two weeks when you have to buy food again plus pay your BNPL bill from your last trip to the supermarket?
“It can easily snowball into more debt,” Ramhold said. “If you’re already dealing with higher levels of debt, using buy now, pay later programs for necessities like groceries can quickly turn into even more. While you aren’t charged interest initially, if you miss a payment, you may be subjected to late fees, among other added costs that just increase the debt and make it harder to pay off.”
Used responsibly, a grocery rewards credit card can earn you up to 5% cash back with every trip to the supermarket. If you pay your balance in full every month, you get the same 0% interest as BNPL while paying only $95 for $100 worth of groceries.
Not only do you forgo those rewards with BNPL, but you cramp your choices.
“While it’s growing in popularity, these options are still only available at certain stores, which means your choices for where to shop may be limited,” Ramhold said. “And limiting where you can shop will also limit your selection of products, which can force you to spend more money, in general.”
Utilize It If Needed, but Don’t Come To Rely on It
BNPL can be a useful band-aid solution if money is tight one month because you have to repair your car or pay a security deposit. But don’t use it if doing so will necessitate your using it again next time.
“Much in the way some households survive paycheck to paycheck, if you start using buy now, pay later for necessities like groceries, you may find that it’s a cycle that just perpetuates and is hard to get out of,” Ramhold said. “For example, if you’re short on funds and use BNPL for groceries, then you may end up paying off the remaining balance OK, but if you’re still short on funds, then you may end up having to resort to BNPL for groceries again. And this cycle can easily continue, which makes it hard to get away from.”
Leaning on BNPL for a need like food is not the same as abusing it for a want like new sunglasses. Treat it as another tool in your financial toolbox — just make sure to recognize its potential for danger before you reach for it.
“While there’s no downside to occasionally using BNPL, consistently delaying everyday purchases could make payments unaffordable,” Adams said. “And missing payments or having insufficient funds in a linked bank account means getting fees from your bank and the BNPL provider. So, abusing BNPL financing for groceries or any purchase is never wise.”
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