This Is How to Use 'Buy Now, Pay Later' Without Falling Into Debt

Buy now, pay later (BNPL) services may seem like a smart way to avoid debt. If you pay on time, you'll usually avoid interest and late fees. Most agreements split your purchase up into four biweekly payments, the first of which is due at the time of purchase, so you can expect to pay off the loan within six weeks.

But BNPL still puts you at risk of falling into debt, particularly if you take on multiple loans at once. More than a quarter of customers who used these loans said they'd either made a late BNPL payment or missed a payment, according to a July 2023 survey by The Ascent, which can lead to accruing interest and late fee charges on top of the amount you originally borrowed.

It's possible to use buy now, pay later without digging yourself into debt. Follow these four tips to avoid debt when you pay with BNPL.

1. Only make purchases that are necessary

Some people have reportedly used BNPL to pay for necessities, like gas and groceries, but beauty and apparel (read: non-essentials) remain the most popular categories for BNPL. To avoid getting into debt, use BNPL only for purchases that you can't afford to delay.

For example, using buy now, pay later could make sense if you need a new laptop for school or a bike that you'll use to commute to work. But if you're looking to buy a sweater or AirPods, step back. Save up for a few weeks, and then pay for your purchase in full.

2. Work BNPL into your budget

Using BNPL financing is still taking on debt, even if it doesn't feel like it, so it's essential to work your payments into your budget for the short term. Make sure you'll have enough money in your bank account to cover each payment. If you realize you've overextended yourself, you may need to take on a side hustle, work extra shifts, or cut back on other expenses to avoid missing payments.

You may be able to select payment dates that sync with your paydays, but not all BNPL services give you this option. Find out when your payments are due and whether you have the option to change them before you enter into the agreement. If you struggle with managing multiple bills and due dates, a budgeting app can be helpful.

3. Avoid making payments with a credit card

One of the big reasons for using BNPL is to avoid paying interest on your purchases. Most BNPL users have their bank accounts or debit cards to make purchases, but many lenders allow you to make payments using a credit card. To avoid paying interest and taking on additional debt, use your bank account or debit card for payments instead of your credit card.

4. Stick with one loan at a time

If you use BNPL, stick with one loan at a time. Multiple loans can lead you to take on more debt than you can afford to repay. Because you're juggling many different payments, you also have lots of due dates to keep track of, which can put you at risk of overdrafting your account.

Is using BNPL better than a credit card?

BNPL isn't necessarily better or worse than a credit card. The best way to pay for a big purchase depends on your financial situation.

If you're worried about paying interest, keep in mind that credit cards typically have at least a 21-day grace period from the end of a billing cycle and when your payment is due. Interest won't accrue if you pay off your balance in full before the due date. You can also avoid paying interest if you qualify for a 0% interest credit card, though keep in mind that your 0% APR is only temporary.

On the other hand, BNPL can be a decent option if you can't afford to pay for a purchase in full but don't qualify for a credit card. Be aware, though, that BNPL loans typically won't help you build credit. If you've been rejected for traditional credit due to a bad credit score or limited credit history, consider applying for a secured credit card to build a payment history.

Buy now, pay later is a type of debt, so make sure you have a plan to tackle it before you make your purchase. But if you understand what you're getting into, a BNPL loan doesn't need to turn into long-term debt.