Buy Now Pay Later, as the name suggests, is a process where customers can pay for certain products using this service and pay the amount to the vendor over some time via installments or in one go. One of the primary reasons why the Buy Now Pay Later App became popular is because of the low-interest rate and faster approval and transactional process.
BNPL helps customers at the end of the month or during a sale season when they don’t have enough cash to buy a product. Using the BNPL app at the right time can help customers save money if proper planning is done.
Following are the things to know while shopping with BNPL apps:
- Limit your spending
Since the customers are given good purchasing power, many people tend to overspend or overbuy many products. This could have a huge backlash on them while they are trying to pay back the installments for Buy Now Pay Later services. One of the best ways to put a limit on your spending is to have a proper plan before going out shopping and only buy those things that are necessary at the moment. Many parents also have an option to put a limit on their kids’ BNPL apps so that they don’t overspend at any given point in time.
- Impact on credit score
Even though BNPL services low-interest rates, this could considerably affect your credit score. A simple example is Suppose you take a small loan through BNPL and pay it back on time. However, at the same time, you take another small loan and pay that as well on time. But now, on your credit line, it is shown that you have taken 2 loans and the average age of credit history goes down due to this. One way to avoid this is to select the BNPL services which do not report your credit lines to credit bureaus.
- Easy Access
One of the main features of the Buy Now Pay Later service is that it is quite easy to use, and a transaction can be completed with just one click. Customers should check if the GUI of the application is easy to use and understand across all ages. Most of the apps work on smartphone and doesn’t have any high specification requirement from these phones.
- Secure transactions
Customers should make sure that the transactions are secure and encrypted while paying with BNPL services. Most of the applications are developed in such a way that the customers’ information is protected and not shared with any third-party vendor. This makes data privacy a huge concern as other people could see your spending habits and misuse them.
- Try to get a 0% APR card from BNPL vendors
Customers who want to repay their loan over a long period should go for a 0% APR card. Many of the vendors provide this service, and if the customer pays off their loan in the first 6 to 21 months of getting their card, they need not pay any interest on the loan amount. This can be very much handy for young people as they have good purchasing options and need not worry about the growing interest rate every month.
- Check if the vendor supports the BNPL option
Even though BNPL is catching up and many of the Gen Z and Baby Boomers are switching to Buy Now Pay Later services, not many businesses still support this option. Small vendors like groceries and other local businesses are still stuck with credit card services. Thus, it is important to check if the vendor supports BNPL services before you start buying from their store/business.
- Check interest rate
Even though Buy Now Pay Later offers interest-free repayment options, if you cannot repay the amount in the defined time period, then the interest rate is applied to the loan amount. Customers should check the interest rate if they are late on the repayment options. Some of the BNPL services put on exorbitant interest rates, which makes it hard on the customers. This can also affect the credit score if the vendor shares information with credit bureaus. BNPL apps are on the rise and are overtaking the credit card market with a storm, with Gen Z people relying more on this service as it is faster and easier to carry than credit cards. Buy Now Pay Later services are one of the key elements in digital finance, wherein there are a good number of adopters. However, one should also do their due research before venturing out with this service.