Buy Now Pay Later (BNPL) services can help you purchase a pricey item even if you don’t have the cash on hand at that moment. With a BNPL, you can spread out payments over time, making it easy to fit an expensive product into your budget.
However, if you miss a payment, you’ll pay high-interest charges and late fees. So, despite the ease of BNPLs, there are several drawbacks:
- These services aren’t regulated like credit cards.
- You may get approved for a BNPL loan when you wouldn’t normally qualify for traditional financing.
- BNPLs can offer you multiple loans at one time, something known as “loan stacking,” which can increase the odds of missing payments and incurring late fees.
A recent report on BNPL found that between 30 and 50 percent of people who have used the service ended up regretting the purchase. Here are some BNPL alternatives to consider.
1. Consider a Low APR Credit Card
You can take advantage of low APR intro offers from credit cards. Look for a card with no interest for six to 12 months and use that card to purchase the item you were going to buy with a BNPL. This way you’ll have that intro period to not worry about interest on your purchase.
Ultimately, you should use a credit card instead of BNPL. The biggest reason is that using a credit card builds your credit while using a BNPL doesn’t. If you use your card and make on-time payments, you’ll improve your credit score. You’ll get no such benefit from making timely BNPL payments.
2. Personal Loan vs. Buy Now, Pay Later
Personal loans may be a better option if you want to use the money for things other than consumer purchases. For example, you can use a personal loan to consolidate higher interest debt.
With a personal loan you can also avoid the temptation to loan stack multiple BNPL purchases. You can apply once for a personal loan and get approved for a large loan. And while your credit is an important factor, you can get pre-approved with multiple lenders and compare your loan offers to find the best one.
3. Tap into Cash Rewards
If you have a credit card that offers cash back, this might be the time to use it. Think ahead and start stacking cash-back rewards with the card. Once you have enough reward points to cover the cost of the purchase, go for it. Just remember to pay off your credit card in full each month.
4. Shop Around
It can be tempting to use BNPL because of the instant gratification. However, you should really shop around for the best deal before buying anything. Look for coupons, special offers, and more.
5. Use Cash for Purchases
One way to avoid late fees and interest charges are to go old school: Buy the item with cash or your debit card. This requires some forethought, but avoiding debt is always a good idea. So if you have concerns about paying off a credit card, go cash or debit.
Learn more about our no annual fees credit card options and apply online today.
Topics:
