Buy Now, Pay Later – Is It a Good Idea?

Assalamu Alaikum girlie! 🌸

Have you heard the buzz about Buy Now, Pay Later (BNPL)? It's taking the shopping world by storm! 🛍️ But before you dive in, let's break it down together.

Today, we'll explore:

✅ What BNPL is and common types

❗ The Hidden Tricks Behind BNPL and What it Means for You

🌼 What To Do Instead

So, let’s jump right in!

What is BNPL? 🤔

Buy Now, Pay Later (BNPL) is a payment option that lets you purchase items and pay for them in installments over time. Sounds like a deal, right? But let’s see what’s really happening behind the scenes.

In the world of online shopping, BNPL has become a popular alternative to credit cards. Retailers partner with BNPL services to offer consumers a way to split their purchases into manageable payments. This option has gained popularity, especially among younger shoppers who may not have a credit card or prefer to avoid interest rates.

Common Types of BNPL: 💳

• Klarna

• Afterpay

• Affirm

• Uplift

• Sezzle

The Trick Behind It: 🚫

BNPL may seem like a good idea up front, but many people find themselves in deep waters. You might think, "What's the harm in paying later? I get to keep more cash in the bank"

The truth is, these plans can lead to overspending and debt. If you miss a payment, you could be hit with late fees and interest charges that stack up quickly.

A recent study on consumer finance found approximately 44% of US adults have missed a BNPL payment (Ramsey Solutions, 2024)! That means almost half of BNPL users were subjected to paying fees and possibly interest using this service.

The dollar volume of U.S. BNPL loans has risen by 1,092% from 2 billion in 2019 to 24 billion 2021 (CFPB, 2022). If you find yourself having to use BNPL to take care of your needs, your problem is bigger than you think! Your NEED a financial audit; print out your bank statements, check income, expenses, and everything in between.

Think about this: Let’s say you purchase a new pair of J’s for $200 with Afterpay.👟 You decide to split that into four payments of $50 every two weeks. On the surface, this seems feasible but you might be setting yourself up for a cycle of debt that feels manageable in the moment but becomes overwhelming over time.

What to Do Instead? 💡

Instead of relying on BNPL to pay for basic expenses, try these:

1. Create a Budget: Use your budgeting spreadsheet or bank app to track your spending and savings. Establish a clear budget that accounts for your income, expenses, and savings goals. You’ve got this💪

2. Set Up a Savings Goal: Plan for your purchases by saving up in advance. If there’s something you want, set a target amount to save over a few weeks or months. This way, you’re not relying on credit to get what you want.🏖

3. Use Cash: Stick to cash for your shopping trips to avoid the temptation of overspending. Withdraw a specific amount of cash and challenge yourself to stick to it. This can be a fun way to control your spending while also saving!💰

4. Delay Your Purchase: When you feel the urge to buy something, give yourself a 24-hour cooling-off period. This way, you assess whether the purchase is truly necessary right now.

5. Educate Yourself: Keep reading our newsletters! The more you understand your finances, the better decisions you’ll make.🤓

Remember, girlie, taking control of your finances is empowering! Make conscious decisions about your spending to pave the way toward financial freedom. 🕊️

Have a lovely week,

Fatimah ✨ 

Founder, Finance Girlie