This Is Really the Only Scenario Where I’d Use a ‘Buy Now, Pay Later’ Plan

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You may want to take a similar approach. 

The practice of swiping a credit card, racking up a balance, and paying it off over time has been in place for a really long time. But these days, consumers have more options for financing purchases thanks to the introduction of “buy now, pay later” plans, or BNPL plans.

BNPL plans let you put a down payment on a purchase and then pay the rest off over a short period of time — usually 12 weeks or less. The benefit of using BNPL plans is that if you stick to your payment schedule, you won’t rack up interest or fees on your purchases.

That’s not the case when you carry a balance forward on a credit card. Let’s say you charge up $2,000 in expenses and can only make a $1,000 payment by the time your bill comes due. Once you start to carry that $1,000 forward, you’ll immediately start accumulating interest on it. And even if you pay off that remaining $1,000 the following month, it will still end up costing you extra.

But while it’s easy to see why consumers might like BNPL plans, I’m really not a fan of them. In fact, there’s really only one situation where I could see myself signing up for one.

An option best reserved for emergencies

I’ve always subscribed to the philosophy that if you can’t afford to pay for a given purchase in full and it isn’t essential, then you shouldn’t buy it. It’s that simple.

Years ago, when I was fresh out of college, some friends went on an amazing trip they financed by charging it on credit cards. I really, really wanted to join them, but I didn’t have the money. And I knew that if I charged my travel expenses, I’d end up paying them off for a long time, racking up a bunch of interest, and potentially damaging my credit score (too much credit card debt can do that, even if you’re making your minimum payments on time every month). So instead, I stayed home, and they dealt with the aftermath of credit card debt for months on end.

It’s for this reason that I’m not a big fan of BNPL plans. In my mind, they push consumers to buy things they can’t afford. But at the end of the day, when you owe money on a BNPL plan, you’re taking on debt. And if you fail to keep up with that debt, it could have serious negative repercussions.

That’s why the only scenario in which I’d use a BNPL plan is if I had to pay for something in a pinch and couldn’t afford it. For example, let’s say my fridge were to go kaput and I couldn’t swing the cost of a new one outright. A fridge is something everyone needs, and it’s the sort of purchase you can’t put off. So in that case, if I didn’t have money in my savings account, I’d consider financing a fridge purchase with a BNPL plan.

But I wouldn’t use one of these plans to finance the purchase of a new TV or clothing. And neither should you.

Don’t get in over your head

BNPL plans might seem like a great deal — until you start to have difficulty keeping up with the payments. So the next time you’re tempted by one of these plans, ask yourself if the item you’re looking to finance is essential. If it isn’t, you’re better off saving up the money and then moving forward with that purchase.

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