UNITED STATES—It has become quite popular, so much to the point it is starting to get many people in serious debt and trouble when it comes to their finances. I’m referring to the trend of ‘Buy Now, Pay Later.’ Have you not heard about it, it can be a variety of different companies from Klarna, Afterpay, Affirm and a few others. How does it work?
It allows you to have the things that you want, without having to pay full price upfront. With most plans, you make an initial payment to receive the item and then you pay the balance in 4, 6 and in some cases now, 12 installments. I will admit I have utilized this tool before in the past, but I’ve never put myself in a predicament where I’ve done more than I can handle. That is where things are getting bad for most Americans.
Why? People are using Buy Now, Pay Later on almost everything possible and they find themselves increasing debt, forgetting that debt has to be paid off at some point. It is delayed to a degree sometimes every 2 weeks you have to make a payment, which can be feasible for most Americans, who just need an extra week or two to accumulate that money before paying off the balance.
I’m a firm believer that when it comes to your finances, especially spending as we get into the holidays, you have to have a budget. There are way too many people, who hate the word ‘BUDGET.’ I don’t love it, but if we spend freely without having a cap what are we doing with money. I told myself for Christmas especially over the holiday week that I planned to spend NO MORE than $200 on gifts for family and friends, and I stuck to that budget I actually spend less than I expected. When you save money that always makes you feel better in my opinion.
If you’re going to utilize a Buy Now, Pay Later plan ensure you are using it on things that you can afford. If you cannot afford the item, you should not be utilizing such a plan. Why? If you know good and well you won’t have $1000 for an item you really want, putting it on a Buy Now, Pay Later plan doesn’t help you. You get the item, but you have debt that you cannot pay off and now you’re dealing with financial woes that impact your credit report. Not good people. Once you tarnish that report it is very difficult to clean it up.
Is this a great tool to utilize? Yes, but you have to be aware of the outstanding balances that you have and ENSURE you have the funding to cover that installment whenever it is due. You miss a payment you have a late fee, and now I think the companies are starting to report those late payments on your credit report. That affects your credit score which impacts your interest rates on purchasing a car or home, or your ability to obtain a credit card as well.
If Buy Now, Pay Later is something you plan to utilize not just for the holidays, but in the future, remember it is just a tool, it should NOT be something you solely rely on to get the things you want in life. Remember the key word being ‘WANT’ vs a ‘NEED.’
