You’ve probably seen the ads for buy now, pay later (BNPL) plans and wondered if they’re worth it. After all, who doesn’t like the idea of being able to purchase something without having to pay for it right away? However, while this may sound like a great deal, there are some dangers associated with these plans that you should be aware of before signing up.

What is Buy Now Pay Later?

Buy now, pay later plans to allow you to make a purchase and then take up to a year to pay it off, interest-free. This can be a great way to finance a large purchase or to spread the cost of an expensive item over time. There are a few things to remember before you sign up for a buy now pay later plan, though.

• First, make sure you understand the terms and conditions of the plan. For example, most plans require you to pay a certain monthly amount, but some may have different rules. Be sure to read the fine print to know exactly what you’re signing up for.
• Second, keep in mind that you will likely be charged interest if you don’t pay off your purchase within the agreed-upon time frame. Make sure you can afford the payments and that you’re comfortable with the interest charges before signing up for a plan.
• Third, remember that buy now, pay later plans are only sometimes the best option. If you’re still determining if you’ll be able to make the payments or are worried about the interest charges, it might be better to look into other financing options.

If you’re considering a buy now, pay later plan, make sure you do your research and understand the terms and conditions before you sign up. Then, with a little planning, you can ensure you’re getting the best deal possible.

Here’s a look at why you should avoid buy now, pay later plans if you can.

1. Encourage impulse buying.

When you see something that you want and know that you can have it without having to pay for it right away, it’s easy to get caught up in the moment and make a purchase that you may not have otherwise made. Unfortunately, this can lead to buyer’s remorse when you realize that you couldn’t afford the item or didn’t need it as much as you thought.

2. You could end up paying more in the long run.

Interest rates on buy now, pay later plans are typically quite high, which means that you could end up paying significantly more for your purchase than you would have if you had just paid for it upfront. In some cases, the interest rates can be so high that you end up paying more than double the item’s original price.

3. Often have high-interest rates.

While the initial appeal of these plans is that you don’t have to pay for your purchase right away, the downside is that you will end up paying more for the item, in the long run, thanks to interest charges. In some cases, the interest rate on these plans can be as high as 30%. If you bought an item for $100, you could pay $130 for it once the interest charges are factored in.

4. It can damage your credit score.

If you’re not careful, buy now, pay later plans can damage your credit score. This is because these plans are reported to the credit bureau as revolving credit accounts. Therefore, you must make your payments on time or carry a balance from one month to the next to maintain your credit score.

5. You could end up dealing with collections.

If you fall behind on your payments, the company you purchased from could turn your account over to a collections agency. This will not only damage your credit score, but it will also be a hassle to deal with. Therefore, it’s best to avoid this situation by being careful with these plans.

6. Only some retailers offer them.

You may be surprised to learn that only some retailers offer to buy now, pay later plans. In addition, many major retailers, do not offer these plans. If you’re set on using one of these plans, you may need to do additional research to find a retailer that offers them.

7. You may need to pay a fee.

Sometimes, you may be charged a fee for using a buy now, pay later plan. This fee can vary depending on the retailer, but it’s typically around $10. That means that if you’re buying an item for $100, you’ll pay $110 for it. The costs of a BNPL plan can mount up rapidly, so calculate the total cost before committing to coverage.

8. You could be limited in how much you can spend.

Some buy now, pay later plans to come with spending limits, which can be as low as $500. This means that if you want to make a purchase that’s more than the limit, you’ll need to find another way to pay for it.

9. Returns may not be accepted.

Another downside to these plans is that returns are often only sometimes accepted. So if you change your mind about a purchase or it turns out to be defective, you may be stuck with it. Therefore, it’s important to read the return policy carefully before purchasing one of these plans.

10. They’re only available in some places.

Buy now, pay later plans are only available in some countries. They’re primarily available in the United States and the United Kingdom. So if you’re located in another country, you may need help to take advantage of these plans.

Conclusion

As tempting as buy now, pay later plans may be, there are some risks associated with them that you should be aware of before signing up. These risks include impulse buying, high-interest rates, and damage to your credit score. If you need to be more careful, buy now, pay later plans that can cost you more in the long run. So if you can avoid them, it’s best to do so.