Are you someone who loves shopping online and often has trouble resisting the temptation of adding items to your cart? Buy Now Pay Later (BNPL) services let you buy the things you love and pay for them over time, often with zero interest.
Still, BNPL can be a double-edged sword if used irresponsibly, quickly putting you in debt and financial struggles.
Here, we’ve compiled five tips for using BNPL services responsibly and avoiding debt. Let’s get into it.
Tip #1: Only Use BNPL When Necessary
Have you ever found yourself scrolling through your favourite online store, adding items to your cart that you probably shouldn’t buy? We’ve all been there, and that’s where BNPL comes in handy.
With the option to buy now and pay later, it can be tempting to splurge on items you don’t necessarily need. However, using BNPL responsibly means only using it when necessary. This includes buying basic items like food, housing, and clothing.
Tip #2: Set a Budget and Stick to It
It’s easy to overspend and lose track of your finances without a budget, especially when using BNPL.
Start by calculating your income and list all your expenses, including rent/mortgage, utilities, food, transportation, entertainment, and any debt repayments. Once you have these figures, subtract your expenses from your income to see what’s left over. This is your discretionary income, which can be used for saving or spending on non-essential items.
When sticking to your budget, you should be realistic about your spending habits and set achievable goals.
Use cash instead of credit cards or BNPL services for discretionary spending, and plan for unexpected expenses by setting aside a portion of your discretionary income each month.
Tip #3: Read the Fine Print
Let’s face it: nobody likes reading the fine print. But when it comes to using buy now, pay later (BNPL) services, it’s important to understand the terms and conditions of the agreement. Failing to do so can lead to hidden fees and penalties that quickly add up and leave you drowning in debt.
Pay close attention to the repayment terms, fees, and penalties, and ensure you understand them before agreeing to the service. If you’re unsure about anything, don’t be afraid to ask questions or get help from a financial advisor.
Tip #4: Keep Track of Payment Due Dates
It’s easy to lose track of payment due dates, especially when using BNPL services. Still, missing payments can have serious consequences, such as late fees, interest charges, and damage to your credit score.
You can keep track of these dates by setting reminders on your phone, calendar, or budgeting apps. Make sure you know the amounts and schedule for each BNPL service and prioritise payments based on their due dates.
Tip #5: Avoid Using Multiple BNPL Services at Once
Using multiple BNPL services at once is risky and can quickly lead to overextending yourself financially.
Imagine you’re a college student who’s just moved out of your parent’s house and into a new apartment. You need to buy furniture, so you decide to use the buy now, pay later (BNPL) services to spread your payments. However, before you know it, you’ve signed up for multiple BNPL services from different retailers. You’re now making payments on a new couch, a refrigerator, a blender, and other items simultaneously.
To avoid this situation, you can limit yourself to one or two BNPL services at most. You can also consider alternatives to using multiple BNPL services like a credit card or a personal loan to make larger purchases. These options have lower interest rates and fees, and you can spread your payments over a longer period.
Shop Smarter, Not Harder
BMNPL may look like an alternative to credit cards, but it’s still a form of debt. While it can be useful for managing cash flow and buying things, always use it cautiously. This will help you make the most of the service without compromising your financial status.
So, enjoy the benefits of BNPL, but always remember to use it responsibly.