Depending on the retailer and the items you purchase, your payments can be spread out over a few weeks or months. The other perk besides being able to pay smaller amounts over time? Paying no interest, unlike what you would pay when using a credit card. BNPL companies include popular ones like Afterpay, Klarna, Affirm, and Sezzle. Because this payment method is gaining popularity, even payment platforms like PayPal are getting in on the action. While BNPL companies don’t make money off you as a consumer, they make money from the retailer you purchase from. Since you may be inspired to spend more money than you usually would when offered a payment plan, BNPL bet on this to make their money back. One of the reasons BNPL is so tempting is that you’ll most likely pay a smaller amount every time. It hurts less. When it hurts less, we’re most likely to keep doing it. That includes using this payment method over and over. The problem is that when they are due, you might be unable to pay them properly or just forget, which can affect your cash flow. But, it can also be added interest of sometimes up to 30%. If you’re late, Afterpay pauses your account until you’re caught up on payments and reassess you as a customer. Don’t think this will be you? It’s estimated that 43% of those who use these services have made a late payment. Late payments can also affect your checking account. Payments to your BNPL will be charged automatically to a credit or debit card you have linked on file to pay back your loan. If your payment is missed because you have no money in your account, you can get hit with insufficient fund fees until it’s fixed. What will affect your credit is if you miss a payment. If you can’t catch up on missed payments, your account will be sent to a collection agency which will show up on your credit report. A ding on your credit can hurt your chances of getting financed for something you may need, like a new car later down the road. What’s $10 here and $20 there? Probably nothing at the time you make the purchase. But eventually, everything adds up. Unless you’re keeping track somewhere, it’s easy for these loans to add up on top of each other to where you have to come up with hundreds of dollars every other week. It’s also easy to just keep financing future purchases. After all, you can’t pay for them because you’re too busy paying off your past. At the end of the day, you know yourself and your spending habits. If your eyes get wide at not having to pay for a huge Sephora haul all at once, BNPL may not be a good fit for you. But If you’re pretty good at determining your wants versus needs, this alternative payment method can offer some wiggle room in your budget. Just try not to make it rain.
