“Buy now, pay later” (BNPL) methods have become popular ways of obtaining credit. Unlike other loans and credit options, it allows individuals to shop and select a payment plan directly at the time of purchase without bearing any interest rates immediately. However, while it has many benefits, these methods come with their own set of risks. To avoid any financial troubles, individuals must be cautious and avoid these mistakes when choosing to use such credit services. 

Impulsive buying
The option to buy something now and pay for it later can create a false sense of security. People tend to believe that since they are able to pay for the thing later, there is no harm in buying it now. This can lead to impulse purchases that are not necessarily required. Besides that, one does not even stop to think twice about the high cost of the product, as “buy now, pay later” often comes with additional fees. This process can be detrimental to an individual’s finances in the long run and could even land them in a debt cycle.

Not reading the terms and conditions
It is important not to overlook the terms and conditions, especially when choosing the “buy now, pay later” option. Like every service, this option also comes with a set of guidelines, which are mentioned under the terms and conditions section. This section outlines vital information regarding the payment methods, late payment fees, number of installments, and other relevant details. To ensure that one has a clear understanding of the agreement and its process, it is essential to read the terms and conditions thoroughly.

Missing payments
Most billing systems, including those of credit card or loan EMIs, have a monthly payment cycle. As a result, many people have developed a habit of checking their bills on a monthly basis. However, a lot of “buy now, pay later” plans have either a weekly or a biweekly payment cycle. So, if a person is unaware of their plan’s cycle, they may miss a couple of payments. Missed payments can attract late fees and penalties, which could prove to be heavy on the pocket. Moreover, failing to meet payment requirements can have a negative impact on one’s credit score. Therefore, when choosing such credit plans, it is best to set reminders on every payment date.

Buying multiple products
Due to the false sense of security provided by such credit schemes, many have resorted to buying multiple products, assuming that they will be able to handle the expenses easily. However, buying multiple products means multiple payment cycles, which can lead to one losing track of payment due dates and the accumulating outstanding amount. Besides, one could find it difficult to repay many weekly or biweekly expenses with the added charges of BNPL. If one finds themselves unable to handle these expenses, they could quickly end up in debt.

Forgetting about other loans/credits
BNPL plans are a type of credit. Therefore, one must consider their other ongoing repayments before signing up for one. For instance, if one is in the process of paying EMIs for a loan or if one is repaying previous BNPL charges, one must take all those expenses into account. Failing to do so or forgetting about any ongoing repayments could result in high costs. Additionally, having multiple forms of credit could also negatively impact one’s credit score, as it would indicate that one relies too much on credit.

Going over the budget
Regardless of the payment method used to purchase something, one must always have a realistic budget when making a purchase. Often, people using credit cards or “buy now, pay later” plans tend to buy things that are beyond their budget. However, they fail to realize that with such credit plans, they will eventually end up paying more for the item due to added charges or interest rates. At the same time, they might find themselves unable to repay the purchases in the future. It is, therefore, always better to set a realistic budget for every purchase and stick to it.

Not checking the return policies with BNPL
Since ‘buy now, pay later’ purchases differ from regular ones, it is important for one to know about the return policies in their case. Before signing up for the plan, one must find out if the store allows returns and refunds on the chosen product. One must also find out what their BNPL agreement says about the return process. Often times, in such cases, the refund is issued to the BNPL lender and not directly to the customer. So, it is best to be aware of all these factors before signing up.

Not keeping track of the payments
To avoid missing payments, many people often choose an autopay system. While it is a practical option, it is important for one to still keep track of their account balance after every payment. This is to ensure that one has enough funds in their account when the payment amount is due. If the account does not have sufficient funds at the time of payment, one’s balance may become negative, eventually leading to an overdraft.