Suze Orman Warns You Should Steer Clear of This 'Tempting Gimmick'

Falling for it could hurt your finances over the long term.

If you've shopped online or in person lately, you may notice that a growing number of companies are offering a new option to make your purchase. It's called Buy Now, Pay Later (BNPL).

Buy Now, Pay Later has been around in some form for a long time, with businesses like furniture stores offering the chance to take your furniture home today and pay for it over time (sometimes with no interest or low interest loans). But it's become much more widespread recently, even for smaller online purchases.

Before you opt for a BNPL arrangement, though, you may want to consider this warning from finance expert Suze Orman about this "too-tempting gimmick."

Suze Orman on Buy Now, Pay Later

Orman recently urged her readers to "stop before agreeing to any buy-now-pay-later offer," because she believes this payment method "gets you to buy something you can't really afford, or kid yourself that it's not really that expensive."

Unfortunately, one of the biggest risks of BNPL is that it does make purchases seem more affordable than they are, since you end up only looking at whether the monthly payment will fit into your budget rather than looking at the big picture. And when you break things down into small chunks, it seems more manageable to pay for them. For instance, if you can pay $10 per month for a $100 item, you may think that sounds cheap and easy to afford -- but you forget about that fact you'll be committing future income to a purchase that's long in the past. You may also be making that purchase more expensive thanks to interest charges.

Rather than falling victim to this gimmick, Orman said you should ask yourself two key questions. First, you should ask yourself whether you'd be able to afford the purchase "without it becoming unpaid credit card debt." Second, you should ask yourself, "If I had to pay 100% of the cost right now, rather than just 25%, would I still buy it?"

Is Orman right?

Orman's advice about steering clear of Buy Now, Pay Later is spot on. The last thing you want to do is make it harder to live within your means in the future by taking on a bunch of debts for different purchases you make with BNPL. You'll soon find yourself with little money left in your bank account if you're committing your future self to make payments for weeks, months, or years into the future.

You also don't want to be tricked into making an impulse purchase or buying something that isn't a true necessity on credit just because the seller makes it look affordable with a "low monthly payment" offer. It doesn't matter whether something fits into your monthly budget -- it matters whether it fits into your big financial picture.

Ultimately, unless you are buying something you really, absolutely, truly need at the current moment, you should try to save up for it rather than financing it -- even if Buy Now, Pay Later makes the financing route seem effortless. Often, that's really not the case at all.