nearly 600,000 consumers who now have one or more BNPL accounts. This is owing to a host of benefits attached to these schemes, particularly given the fact that they do not attract any extra cost or interest, as long as the customer pays for the item on time. “It can be a convenient way to pay for items when you don’t have the cash and is an alternative to a credit card,” Kate Browne, Personal finance expert at independent comparison platform Finder, said. “BNPL also tends to focus on smaller amounts of credit so theoretically means you are unable to get into as much trouble as you could with a credit card in terms of overspending.” Moreover, these services are easy to use via apps and their payment terms are generally very clear.
While it is a convenient payment method, however, it can get pretty messy if you fail to factor the recurring payments into your budget. This can be especially true if the consumer is juggling multiple BNPL plans on top of other debts. On the other hand, this scheme, which involve minimal credit checks, do not always offer a clear picture of BNPL plans you may hold with different companies, and so it is possible to bite off more than you can chew.
This is why Browne warned that although BNPL can be convenient it should still be treated as a form of credit. She pointed out that running into trouble with these schemes can negatively affect your credit score, and although the late fees that are being charged on these services sound minimal they do add up to a significant amount, especially if you are making multiple purchases.
Considering these risks, there are a few simple steps that can be followed by a consumer to get the most out of BNPL schemes without breaking the bank. Firstly, it is important to not make too many purchases at once. This is owing to the fact that the more you spend on these schemes, the more repayments you’ll have to pay back at once. Another important advice is to play your repayment days, since you have a choice on when and how often you make payments, aiming for your pay day or the day after is your best bet to avoid any late fees. Some experts also advice consumers to use BNPL services for essentials, since some dentists, travel agents and even mechanics buy now, pay later options for those caught out moments.
