What You Should Know About Buy Now, Pay Later (BNPL)

Buy Now Pay Later or BNPL is a payment option that allows you to purchase items online or at a brick and mortar store without paying for the purchase immediately. With this type of payment, you agree to pay for the purchase over time, often with fees.

How does BNPL work?

The way these services work is pretty simple. First, you select the items you'd like to purchase and add them to your shopping cart. If the retailer accepts this type of payment, you'll be given an option at checkout to pay for these purchases in instalments rather than upfront. Your first monthly instalment will likely be due right around the time your item or service is scheduled to arrive.

Most popular Buy Now, Pay Later apps

There are a number of buy now pay later apps available on the Google Play store and the Apple app store. Here is a list of some of the most popular buy now pay later apps:

1. Credy – Provides buy now, pay later options for high fashion items from brands such as Nike and Adidas. Buyers have six months to pay for items, which are shipped within 24 hours. 
2. Smync - buy now, pay later option that is available worldwide without any credit checks or proof of income required. Buyers receive the item straight away and then it's paid off in weekly instalments with Smync; interest-free. 
3. Afterpay – Buy now, pay later app that enables customers to buy items from a variety of retailers and have it delivered straight away. Customers then have four weeks to pay the balance off in instalments without any interest. 
4. ZipPay – buy now, pay later app that provides customers with options for buying home appliances such as washing machines and refrigerators, or for taking out a loan for a higher value purchase. Customers have the option to pay off their balance in weekly instalments with no interest. 
5. Klarna - with no doubt one of the biggest players on the BNPL scene, Klarna offers customers a variety of options for payment, and has partnered with many retailers to bring this type of payment to their customers.

These are just some of the buy now pay later apps that are available on the market. Be sure to do your research and find the one that is best for you. When comparing providers, make sure you understand what you're being charged. Are there any late fees? What's the interest rate? How much time do you have to pay it off? These are all important questions to ask before using buy now, pay later.

Who can use it and what are the pros and cons?

A big pro for BNPLs is the convenience factor. BNPLs are generally open to all consumers, and offer a way to delay payments with no additional fees at time of payment. BNPL can thus be a great way to purchase items you need or want without having to worry about making a payment right away. This can be especially helpful if you're short on cash or while waiting for your next paycheck.

On the other hand, there are some cons to using BNPL. First, the interest rates on BNPL agreements can be quite high, so you'll want to make sure you understand what you're being charged. Second, if you don't pay off your purchase within the allotted time, you could end up with a lot of debt, as missed payments can result in steep late fees and other penalties. Always make sure you have the funds available to make your payment on time. 

What are the fees associated with BNPL? 

Most major BNPL providers do not charge any additional fees for paying through their services. However, they do charge late fees and interest for late payments on instalments.      

Is there a limit to how much I can spend using BNPL? 

Each BNPL provider has their own way of determining individual spending limits. These are based on credit assessments, the agreement with the retailer, and an internal algorithm. New customers will have a lower spending limit than returning clients with good repayment histories.     

Will Buy Now Pay Later affect my credit?

Using BNPL doesn’t have a negative impact on your credit, however, late payments or failure to pay off an instalment could result in negative consequences for your credit history. If you miss your payment or don't pay off your purchase within the allotted time, you could end up with a lot of debt. That's why it's important to always make sure you have the funds available to make your payment on time. 

What to look out for

When considering a buy now, pay later purchase, there are a few things you'll want to watch out for. First, be sure to read the terms and conditions of the agreement carefully. Often, BNPL agreements include high-interest rates and other penalties for late payments. Be aware of the fact that some BNPL providers may require you to pay back your entire purchase price within a very short period of time. So if you're not careful, you could find yourself in a lot of debt very quickly.

Finally, always make sure you have the funds available to make your payment on time. If you miss your due date, you could end up with late fees and other penalties.

And Remember…

Just because you have the option to pay later, doesn't mean you should put off paying your bills. Always try to stay ahead of your expenses and only use BNPL as a last resort.