Is 'buy-now-pay-later' worth it?
Buy-now-pay-later services are pretty much everywhere these days. It's actually pretty rare to go and shop online and then not see one of the logos for one of the many companies out there. But you may be asking yourself, 'Should I use one of these services?'
So, let's break this down, and first we're going to talk about what buy now pay later is. It's basically just a small loan. These programs are there to let you split your purchase into smaller installments, and the most popular version of this program is to split a purchase into four equal payments. Those payments will be due every two weeks and pretty much every service out there has some version of this.
All you do is go in and select a bank account or a credit card to be the back end of what you're charged and then they take care of the rest. Probably one of the biggest, if not the single biggest, selling point for buy now pay later is that in the majority of cases they won't charge you a single penny of interest. I mean they'll probably charge you some type of late fee if you miss a payment, but there's no interest at all and that's because they actually make their money on the back end by charging the companies that you're going to buy from. And so, these fees can end up ranging anywhere from three up to six percent.
So, for me, I'm sure for you, the obvious next question is why are these retailers so eager to pay a pretty high fee just to use these services?
The answer is they know that we're going to spend way more money when we are given the option to break up our purchases into these smaller payment amounts. Studies have actually shown that the average online purchase more than triples from around 100 to well over 300 dollars when you incorporate these buy now pay later services.
So, for you, you want to know, ‘Are these services worth it?’ And, you know, I'd say pretty much every time that if this is going to cause you to spend more money than you would if you had to just pay for the whole purchase at once, no don't do it.
I mean it really doesn't matter if there's no interest at all, it's still going to cost you money. So, my recommendation to you all is avoid buy now pay later services. It's just a really easy way to let things get out of control extremely fast.