💳 The Hidden Dangers of “Buy Now, Pay Later”
How to buy now, pay later, and regret forever
How to buy now, pay later, and regret forever
You know that feeling when you see something you want online but don’t have the cash to buy it right away?
You could use your credit card, but that would mean paying interest and fees and possibly hurting your credit score.
Or you could use one of those shiny new buy now, pay later (BNPL) options that let you split your purchase into four easy, interest-free payments.
Sounds like a no-brainer, right?
Wrong.
In today’s episode of the week, Patrick Bet-David exposes the dark side of BNPL and why it’s worse than credit cards. If you haven’t watched it yet, you should. It’s a must-see for anyone who cares about their financial health.
What is BNPL and why is it so popular?
BNPL is a payment method that allows you to buy something online and pay for it later in installments, usually without any interest or fees.
It’s like layaway but without the hassle of waiting for your item to ship until you’ve paid it off.
Companies like Affirm, Klarna, Afterpay, and Quadpay, which partner with thousands of online retailers, from Walmart to Sephora to Peloton offer BNPL.
BNPL is booming, especially among younger consumers wary of credit cards and debt. According to a report by The Ascent, BNPL usage grew by 215% in 2020, reaching 45 million users in the US.
The appeal of BNPL is obvious: it gives you instant gratification, flexibility, and convenience. You can buy what you want now and pay for it later, without any extra cost or impact on your credit.
But as Patrick explains, BNPL is not as good as it sounds. It’s worse than credit cards in many ways.
How BNPL can ruin your finances and your life
Here are some of the hidden dangers and drawbacks of BNPL that Patrick reveals in the video:
BNPL makes you spend more than you can afford. When you see a big price tag, you may think twice before buying something. But when you see a small monthly payment, you may feel like you can afford it. This can lead you to buy more than you need or can afford and end up with more debt than you can manage. Patrick cites a study by Finder that found that 39% of BNPL users have spent more than they normally would using this payment method.
BNPL charges fees for late payments. While BNPL may not charge interest, it does charge fees if you miss a payment or have insufficient funds in your account. These fees can add up quickly and make your purchase more expensive than you thought. They can also hurt your credit score if the BNPL provider reports your late payments to credit bureaus. Patrick cites another study by Finder that found that 34% of BNPL users have missed at least one payment, and 24% have paid a late fee.
BNPL offers less protection than credit cards. Credit cards come with a lot of benefits and protections, such as fraud protection, extended warranties, chargebacks, and rewards. BNPL does not offer these perks, and may even expose you to more risks. For example, if you buy something with BNPL and it arrives broken or defective, you may not be able to return it or get a refund. You may still have to pay for it, even if you don’t get what you ordered.
BNPL is not regulated like credit cards. Credit cards are subject to strict regulations and consumer protections, such as the Truth in Lending Act and the Credit CARD Act. These laws require credit card issuers to disclose the terms and conditions of their products, limit their fees and interest rates, and provide fair and transparent billing practices. BNPL is not regulated in the same way and may have hidden or unclear terms and conditions that can catch you off guard.
As you can see, BNPL is not as good as it seems. It may seem like a convenient and cost-effective way to buy things online, but it can cost you more in the long run and put you in a worse financial situation than credit cards.
What should you do instead?
The best advice is to avoid debt altogether and only buy what you can afford with cash or debit. But if you do need to use credit, use it wisely and responsibly. Choose a credit card that suits your needs and offers the best rewards and benefits. Pay off your balance in full every month and avoid paying interest and fees. And most importantly, stick to a budget and track your spending.
If you want to watch the full episode, you can find it here ⬇️