By: Declan Sweeney, Experiential Programming & Outreach Coordinator (Financial Literacy)
What to consider before using BNPL Services
Will I be able to make the payments?
It is almost always better to purchase upfront. With installment payments, you need to ensure that you stay on top of these purchases as the interest rate is extremely high.
Is this product an immediate need?
As everyone’s needs differ, some things may be more important to you than others. However, if purchasing using these services, it is essential to not be pulled into purchasing “wants” or “nice-to-have” items. These apps make spending easy, but you need to be sure that something’s a necessity before fast-tracking the purchase.
Know your budget
These apps make it easy to “balance” your budget in a month, but may cause excessive stress further down the line. Understand your budget and whether these payments in later months will cause significant stress or limitations.
Read the contract
Review the repayment schedule, fees and potential penalties for late payments. Does it make sense for you and your personal risk tolerance to take this risk?
Final thoughts
BNPL services can be convenient, but they also have significant risks. According to Lending Tree, 41% of BNPL users paid late within the previous year. These apps and services often lead to debt if not used cautiously.
At Mac’s Money Centre, we want to ensure you have all the information needed to make financial decisions, including whether or not to use BNPL services with the associated risks.
Have questions about budgeting, credit and other important financial topics? Email us at money@mcmaster.ca for support.
Read more: Buy now, pay later plans