“Buy Now, Pay Later” Highlights How Much Financial Stress Most Americans Are Under This Holiday Season
With inflation showing no signs of slowing down, there’s a chance you’re feeling the financial pinch this holiday season.
Despite this, many Americans resort to “buy now, pay later” (BNPL) payment options this year. These plans let you splurge on gifts for your loved ones without worrying about having the money until later.
While these programs let you enjoy your holidays, are they as good as they seem? Let’s find out.
How Do BNPL Programs Work?
BNPL programs can be best described as installment plans you take out when you buy a specific product. Instead of paying for it all at once, you pay a fraction of it upfront, then finish the remaining balance over time.
Many payment platforms and apps like PayPal or Zip developed these programs to give buyers an alternative to paying with credit cards. All retailers do is run a soft credit check and give you the loan on the spot.
Depending on where you shop, many companies that do this often let you pay your installments back interest-free!
Do These Programs Help Or Hurt Buyers?
BNPL programs can ease the short-term financial burden of larger purchases like holiday presents. Many of them are interest-free and are a more accessible option to those who don’t have credit cards. If you pass the initial credit check, you can qualify for these programs.
On the other hand, BNPL plans can lead you into debt if you don’t have the money to pay when you need to. For example, a whopping 56% of Americans who took out BNPL plans last year couldn’t pay them off.
Missing a BNPL payment can also damage your credit score, which may prevent you from accessing credit when you truly need it.
How To Manage Your BNPL Plan Responsibly
Like credit cards, BNPL plans have perks if you know how to use them responsibly. Here are a few tips to follow before you sign up for one:
Set A Strict Budget Before You Start Buying
We understand you want to make everyone happy during the holidays. But remember, presents are wants, not needs.
If you’re on a tight budget this year, having–and sticking to–a fixed budget before you start shopping gives you a clear limit on how much you can spend. With a BNPL plan, determine what kind of installments you can comfortably afford before signing up.
Take Advantage Of Sales
The holidays are the perfect time for clearance sales before the new year.
From Black Friday to Cyber Monday, companies and online retailers will offer promotions you can take advantage of to save money. Sticking to discounted items will also mean lower BNPL payments, so keep an eye out for any good deals!
Understand The Rules
While many retailers offer BNPL programs, each has different rules you need to follow. Reading the fine print can be a tedious task. That said, it can also save you from signing up for an installment plan with potentially high-interest rates or late fees.
The Bottom Line
The holidays are when you want to give as much as possible to the people you love. But with most Americans going into this year’s season with slimmer wallets, some are looking for alternatives to ensure their families won’t go without presents this year.
BNPL payment plans are a great way to ease the financial stress of buying gifts without worrying about credit cards or paying everything off at once.
But if you don’t have the money, it can land you more debt and ruin your credit score if you start missing payments.
Always plan your holiday expenses ahead of time. If you need more money to afford something, wait until after the holidays. It’s much better to be patient rather than potentially get into financial trouble.
Or, if you’re looking to make some extra money to buy your presents this year, here are a few side gigs you can try!
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