5 Downsides of Using ‘Buy Now, Pay Later’ Plans for the Holidays
Written by
Brooke Barley
Edited by
Jenna Klaverweiden
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With so many opportunities and reasons to shop this season, there’s a temptation to take advantage of “buy now, pay later” (BNPL) plans. These allow shoppers to put some money down on an item now and pay it off over time.
This can seem convenient, but consumer experts warn that these plans are not without their faults.
Read on to learn more about the pitfalls of BNPL plans.
Easy To Overspend
The option to buy now and pay later is available on most online shopping transactions now, making it easy to use it with just one click. This is especially true during the holidays, when many consumers are shopping more than usual.
Melanie Musson, a finance expert with InsuranceProviders.com, explained that this can easily lead to overspending. “The biggest downside to buy now, pay later plans is that they make spending money you don’t have easy. You can usually get approved for BNPL plans without having your credit checked. Basically, all you have to do is provide a signature agreeing to the repayment terms, and you’re approved,” she said.
Musson urged consumers to spend only money they have on hand. “If you don’t have the money to buy something, you shouldn’t buy it. Going into debt means you’ll start your next paycheck behind. Instead of using your income to work for you, you’ll spend it trying to catch up,” she explained.
Payments Can Pile Up
If shoppers repeatedly take advantage of BNPL plans, the payments can really add up. Some people might even lose track of just how many plans they’ve taken part in when holiday shopping and how much they owe, which can cause a headache come the new year.
“Consumers who tend to BNPL end up doing it over and over again, racking up more debt and could end up owing hundreds or even thousands of dollars down the road,” said Alex Smith, founder of A Couple Consumers. “Obviously that becomes a problem when they see their newly added monthly bills and they may not have the money.”
Costly Fees
Musson explained that failing to pay off BNPL plans can actually result in more money owed. “Buy now pay later plans usually give you a couple of months to pay back what you borrowed. If you can’t make the payments in time, you’ll be faced with fees and interest,” she said.
In this situation, consumers are spending more than they would have if they had just bought the item outright.
Tricky Returns
Not all purchases are worth keeping. However, participating in a BNPL plan can make returning an item a pain.
“Unlike a straightforward credit card return, when you buy with BNPL, you’re often still responsible for making payments while the return processes,” said Anna Petosa, an executive at SwagDrop. “This delay can lead to missed payments, extra fees and headaches just to get your money back.”
Purchases Aren’t Protected
Petosa explained that credit cards offer a lot of protections for consumers. This is not the case with BNPL plans.
“Without heavy regulation, BNPL providers set their own terms, which can vary a lot. For people who aren’t careful, this lack of oversight means fewer consumer rights and more chances of ending up in an unfavorable situation,” she said.
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