Why Suze Orman Calls 'Buy Now, Pay Later' Plans a 'Gateway to Overspending'

These plans may be convenient, but they can also be dangerous.

Now that we're deep in the throes of the holiday shopping season, you may be spending a lot more money than usual on gifts and other purchases. And as such, money may be getting tight.

If you're feeling squeezed, then you may be inclined to take advantage of "buy now, pay later" plans, or BNPL plans. These plans allow you to pay off purchases in installments rather than having to pay for things in full.

If you're wondering how BNPL plans differ from credit cards, there's one major point of distinction. BNPL plans won't charge you money in interest or fees if you make your payments on time. Credit cards, on the other hand, will start charging you interest as soon as you fail to pay off a balance in full.

At first glance, BNPL plans might seem like a great option to look at when you're doing a lot of shopping or need more leeway in paying for purchases. But financial guru Suze Orman warns that they can be a "gateway to overspending."

Why Orman cautions consumers to proceed with caution

With a BNPL plan, you're generally only putting about 25% of your purchase's cost down at the time you buy it, and you're financing the rest. You'll generally then make a payment every few weeks so your purchases are paid off in about three months' time.

That might appeal to a lot of people, since it means parting with less money on the spot. But that could lead to overspending.

When you're not forced to part with a lot of money at once, it can trick your brain into thinking you've spent less, says Orman. And if you think you've spent less, you might continue spending -- only to run into trouble when your BNPL plan payments start coming due.

Not only can being late with a BNPL plan payment cost you money in fees and interest, but it can also cause damage to your credit score, the same way a late credit card payment can. And so Orman thinks consumers should be really careful when using BNPL plans.

Should you use BNPL plans for your purchases?

Orman says that before you sign up for a BNPL plan, you should ask yourself if the purchase you're making is a need or a want. If it's a want, she says you should consider whether you can really afford it. If you can't pay for it in full on the spot, then chances are, the answer to that question is no.

Orman also says that you may want to prioritize other goals before spending money on wants. These include boosting your savings account balance and paying off existing debt, whether it's a credit card or personal loan.

BNPL plans may be convenient. But they can also lead you to spend more money than you should. So before you sign up for one, think about whether that's really the best route to take. And also, think about whether you should be buying the item in question in the first place.