4 Good Reasons to Use 'Buy Now, Pay Later' -- and 2 Bad Ones

by Lyle Daly | Updated July 21, 2021 - First published on Aug. 22, 2020

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There are plenty of reasons to use "buy now, pay later," but not all of them are smart.

"Buy now, pay later" (BNPL) services have grown in popularity, with more retailers offering them and more consumers using them. This service allows you to make a purchase, then pay it off with a series of interest-free payments instead of all at once. While it's easier than ever to go with BNPL, that leads to an important question -- is it a good idea, or will it come back to bite you?

In our study on BNPL services, we asked respondents why they chose this payment option. We've included the six most popular reasons here, starting with four good reasons followed by two bad ones. If you're thinking about BNPL, these could help you figure out whether you're making the right decision.

1. To avoid paying credit card interest

Almost 40% of consumers use BNPL because they don't want to pay credit card interest. That's great news, because this is one of the smartest reasons to go with BNPL.

If you pay on time, your BNPL purchase will be interest-free. Credit cards, on the other hand, often have APRs of 15% or higher, so it can be expensive to carry a balance. There are credit cards with 0% intro APRs, but those are usually only available if you have good credit, whereas BNPL services are an option for almost anyone.

2. To make purchases that otherwise wouldn't fit in my budget

It probably comes as no surprise that just over 38% of consumers go with BNPL for purchases that don't work within their budgets. BNPL allows you to make a purchase and spread that cost over multiple payments. Even if you could afford to pay in full, you could still elect to pay over time so that you're not depleting too much of your savings at once.

3. To borrow money without a credit check

Traditionally, there haven't been many good ways to borrow money with subpar credit. Even if you're approved for a credit card or loan, it will likely have a high interest rate.

BNPL services are a useful alternative here, and nearly a quarter of consumers chose BNPL for this reason. You can get interest-free financing regardless of your credit history. And since there's no hard credit check required, your credit score won't be affected like it would with a credit card or loan application.

4. I can't get approved for a credit card

Although there are credit cards for bad credit, not everyone gets approved, and some of these cards charge security deposits and/or other fees. Given those obstacles, it makes sense that almost 15% of consumers choose BNPL when they can't get approved for credit cards.

As we've covered, it's much easier to get approved for BNPL. You can still build credit with this type of service by making your payments on time, and if you do that, you also won't pay any fees.

5. I don't like to use credit cards

It's understandable to go with BNPL if credit card companies keep turning you down. But it's not a good idea to use BNPL because you don't like credit cards, which was the case for just over 16% of those surveyed. While some consumers, particularly younger consumers, have a negative view of credit cards, there are a couple of reasons to get at least one if you can.

Credit cards are one of the best tools for improving your credit. You can do this with BNPL, too, but that type of payment arrangement eventually ends. A credit card is something you can use for decades, building and maintaining a strong payment history. You can also earn rewards such as cash back or travel points using credit cards. Many of the best credit cards could get you hundreds of dollars in value per year from the rewards they earn.

6. My credit cards are maxed out

Unfortunately, about 14% of consumers went with BNPL because they'd maxed out their credit cards, and this is, by far, the worst reason to do so.

You should avoid maxing out a credit card. It can hurt your credit score, and it can be difficult to pay off the balance. When you've maxed out multiple credit cards, it makes the situation even worse. The last thing you should do in that scenario is borrow more money.

Deciding if you should buy now, pay later

The reasons above are a good starting point to determine if you should use BNPL. Just keep in mind that your reasons are only one part of the equation. You also need to consider what you'd be buying, how much it costs in total, and how long it will take you to pay it off, all equally important factors.

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