Buy Now Pay Later red flags and Affording a car

The red flags of BNPL services, how to afford a large purchase, and cashing in on birthday freebies!

In My Humble Opinion

Buy Now, Pay Later is a threat to your finances – if you’re not careful. 

You’ve certainly been served up ads for Buy Now, Pay Later services like Klarna, Affirm, Afterpay. You know the ones. You’ve clicked check out and you see the total price of your item and underneath a line reading something like “or 4 interest-free payments of $33 with Affirm. Learn more.” 

Buy Now, Pay Later isn’t all the different from putting an item on layaway or paying with a credit card. Except the pitch sounds better than using a credit card because of the big “interest free” claim and the installment loan angle. Auto loans, mortgages, student loans are all installment loans. You borrow a lump sum and pay it back in predetermined (usually monthly) payments. 

Let’s clear one thing up. I’m not entirely anti-Buy Now, Pay Later (BNPL). I just have a healthy dose of skepticism because of how easy it can be to fall into a debt cycle. It can make sense to use a BNPL service for an expensive purchase like a couch or Invisalign. Making installment payments with no interest can help you cash flow the purchase. Great, so long as you actually stick to the payment plan and don’t overwhelm your budget with too many BNPL purchases. 

I’m not anti-credit cards either. In fact, I’m a big fan of credit cards — even ones with an annual fee – but only if they’re being used for purchases that will be paid off on time and in full each month. Credit card debt is a nightmare. 

There are a few reasons BNPL services are giving me big 🚩 red flags 🚩.