Buy Now, Pay Later (‘BNPL’) is something of a new-ish phenomenon. It lets us buy things like shoes, clothes, handbags, you name it. All on credit. Basically, we’ve now got an outlet to buy what we want and (the best part) when we want. Regardless of whether we can actually afford it. The mere existence of this contraption is encouraging a new generation of shopaholics and spenders, fuelling poor money habits. All in all, it’s making it harder and harder for us to simply say no. To tell ourselves that we don’t need it and that we shouldn’t feel hurried into buying it. 

We fall into the trap of buying something we probably don’t need nor can afford (not right now anyway) by spreading out our payment over a number of weeks (with no interest, only if we pay on-time though Klarna charges you nada) just so we can bag our stuff. Now. Cause who wants to wait till payday right? That dress (the last one in your size) might go outa stock and that’ll be bad news. Real bad news. 

The Beast Is Growing

BNPL companies (like Klarna, worth ~$60bn) are becoming gigantic by tapping into our (very real) desire for wanting our things here and now. We can hardly wait for our stuff and boy do they know it. They’ve made it possible for us snap up our favourite things without having to pay for them. Not just yet anyway! Last year, BNPL transacted $55bn alone. This beast is only getting bigger. Up until now, though, consumeres have been able to splash out on whatever they want, without these small loans (yes, loans!) showing up on their credit report. Well, not anymore.

Any purchase you make using BNPL will now show up on your credit report. The reason why these companies are doing this is to give lenders a better sense of consumers’ financial health: what they owe, and to whom. If a consumer has a loan, these guys wanna know all about it. They’re not nosey so-and-sos for no reason, it’s cause they need to know whether you’re able to pay your loans back. If you can’t pay back your BNPL loans (which they’ll now be able to see) they’ll make it harder for you to get a loan with them (like a mortgage) since you’re unable to pay back a small amount, how can you be trusted with more. But before that, consumers were able to use BNPL willy-nilly with no effect on their credit score (unless you miss your payments in which case you’re toast!) but now things have changed. 

And I think this is a good move on their part. After all, it’ll (hopefully) give an incentive for consumers to stay on top of their payments or maybe it’ll cause them to think twice before they use the BNPL service. Just think how bad it’s gonna look to your bank (who I bet you’ll want a mortgage from, at some point) if you take out a loan (yes, BNPL is a loan! It’s not free money!) to buy a $40 pair of shoes. This shows banks that you a) cannot afford to make a small purchase and/or b) that you have cash flow issues. Either way, it’s not a cool look. And one you seriously want to be avoiding. At all costs.

If you’re wanting to use BNPL to boost your credit score (aka show your lender you can have a loan and be able to pay it back) I would stick to credit cards. That way you won’t be tempted (not in the slightest bit) to go down the rabbit hole of BNPL. Instead, use your credit card for your normal purchases and pay them back at the end of the month. BNPL is dangerous and could very quickly start to spiral out of control. It starts off nice ‘n innocent (as most bad things do) but then encourages you and entices you to make payments you really shouldn’t be making. 

Nothing is free. Everything has a cost, hidden or otherwise. And while BNPL seems great an all: you get your shoes and you don’t have to pay for them, not for a few weeks anyway! What could be better, huh. But guess what, it seduces you into one of the most dangerous money moves ever: spending tomorrow’s money today. It’s why so many people end up broke, despite having a pay-check coming in for them. Cause they end up spending July’s pay-check, today. So what do you think will happen when July eventually comes round? That money will be gone. You’d have already spent it. And to make matters worse, rents are typically paid at the beginning of each month while salaries only at the end. Now if you don’t have a stash of cash somewhere, do you see how easy it is to fall into the debt trap? 

Do You Really Need It, Now?

If you can’t afford to buy it twice, you probably shouldn’t be buying it once. BNPL only encourages reckless spending, to splash out on things we know we don’t need (but trick ourselves into thinking we do) and most likely can’t really afford. But we live in a society whereby we have to look like the Joneses, dress like the Joneses and drive like the Joneses. We’ve become so used to spending money we don’t have all to impress people we don’t like. But here’s the thing, when we don’t feel good about ourselves, we buy yet more things to fill that void. More is not the answer. Less is. It always is. When you feel like you need a pick-me-up, know that you don’t need to run to the store (yes! BNPL can be used in-store) at the first chance you get.

Self-control is hard. It’s hard when you see those shoes flashing at you with X% off ‘FOR TODAY ONLY’. Yeah right. See, I tested it out. I bought an item with this magical 20% off with that countdown at the top of the screen. 00 00 00 29 09 remaining. Quick. I had better buy it. So I did. I checked the website a little while later and the countdown button was gone but this time it was 15% off + free delivery. Companies are clever. And they employ clever people to get you to buy stuff. You feel pressured to buy since you’re worried you’ll miss out on the (one-off) discount or that your size will disappear. So you rush to checkout, realise you don’t have money for this so you pay for it on BNPL. For the worry of another day.

Don’t fall into that trap. Buy your stuff when you’re unrushed. When you know you can afford it not when some 10% one-timer code ushers you in. BNPL is yet another one of the wheels in this massive consumerist machine that we fall for, time after time, It’s no wonder these guys are worth billions. But don’t fall for it. It just isn’t worth it. Buying stuff on impulse won’t leave you any happier. It’ll just leave you wanting more, and more and more. 

You already have everything you need. Everything else is simply an extra. Extras that aren’t worth going into debt over. 

Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.