I’ve been asked what I think of “buy now, pay later”.  My normal answer is “not much”.

How exactly does “buy now, pay later “work? You see something you want to buy, such as furniture.  The retailer sells you their product and you can have it immediately using buy now, pay later.  At the time of purchase, you may have to provide a downpayment to start the process.  Then, you’ll pay for your purchase over a set period of weeks or months.  Think of it like buying a house or a car only with a much shorter term.  The retailer will get the full purchase price from the company who does their financing.

Often, payments will be charged to your credit or debit cards to ensure payment.  This is where you could get into trouble if you don’t pay your credit card off every month.  Interest will be charged on your credit card if that’s what you use.  If you use your debit card, and you’re not careful, you run the risk of over drafting your account. And, if you do multiple “buy now, pay later” accounts, you could easily overspend.

Another downside is that large purchases can appear reasonably priced because of the small installment payments.  It’s like car payments.  People don’t care about the price of the car.  They just care about the cost of the payment and the length of time to pay it off.  And, if you make a payment late, you could incur penalties, and your credit score could be affected

Moral of the story:

No buy now, pay later for me.  Use my method.  If you can’t pay for purchases up front, then you can’t afford it.  My two exceptions to that rule are mortgages and car loans.  I do advise paying extra on those two types of loans to pay them off quicker.  In my book, I discuss how I paid my home and car early.  But, you say, I have an emergency, and I need to finance it!!!  No, build your emergency fund and pay for whatever your issue is.