Buy Now, Pay Later (BNPL) services have become increasingly popular, offering a convenient way to make purchases without immediate full payment. However, it’s easy to overextend your budget if you’re not careful. In this article, we’ll explore nine essential tips to help you avoid overspending with BNPL services.

1. Set a Clear Budget

As with any form of borrowing, it’s crucial to spend within your means. Create a budget based on your monthly income, expenses, and savings contributions. This will give you a clear idea of what you can afford to spend on BNPL purchases each month. Remember, BNPL plans typically require 25% of the purchase upfront and payments every two weeks until the purchase is paid off, often over six weeks. Factor this into your budget calculations to avoid overspending.

2. Compare BNPL with Other Payment Options

Before opting for BNPL, consider other payment options such as credit or debit cards. Using a debit card limits you to the amount in your checking account, while a credit card can offer rewards and a grace period to avoid interest if paid off quickly. If you decide on BNPL, compare terms among providers and check prices with different retailers to ensure you’re not overpaying.

3. Avoid Using BNPL for Impulse Spending

Impulse purchases can lead to regret, especially if the items are too expensive or unnecessary. Returns for BNPL purchases can be complicated and don’t eliminate your payment obligations immediately. Give yourself a cooling-off period before making a purchase to determine if it’s something you truly need. Unsubscribe from marketing emails to reduce temptation from sales offers and promotional discounts.

4. Use Responsibly

Borrowing always comes with risks. Avoid borrowing more than you can afford, even if the monthly payments seem manageable. BNPL lenders may raise your borrowing limit based on your spending and repayment history, but that doesn’t mean you can afford to spend more. Ensure you’re not borrowing for the wrong reasons, such as keeping up with trends. If BNPL is the only way you can afford an expensive item, reconsider your purchase.

5. Monitor Your Spending

Keep track of your purchases and total balance, especially if you use multiple BNPL plans simultaneously. Regularly review your outstanding plans and upcoming payments to know where you stand before making a new purchase. Track your overall spending to ensure you’re not regularly exceeding your monthly budget.

6. Monitor Payment Deadlines

BNPL providers may require automatic payments from your bank account, making it easy to forget due dates. Ensure you have enough money in your account to cover BNPL payments and other expenses. If your provider doesn’t require autopay, set reminders for upcoming payments to avoid late fees and potential interest charges.

7. Limit the Number of BNPL Plans

Having multiple BNPL plans with different providers can make it challenging to manage payments and track your overall balance. Limit the number of BNPL plans you have at any time to avoid overspending and financial strain.

8. Understand What You’re Getting Into with BNPL

Many BNPL plans offer a “pay in four” model with four biweekly payments, but not all do. Some plans extend payments over a longer period and charge interest. Be clear on the terms and conditions of your BNPL plan by checking the frequently asked questions and disclosures before committing.

9. Consider Using a Credit Card

Credit cards offer benefits over BNPL, such as a single balance to repay, a grace period to avoid interest, and rewards on purchases. Some credit cards offer installment plans for large purchases, allowing fixed monthly payments. Depending on your credit, you may qualify for a 0% introductory rate credit card, providing interest-free purchases for a year or more.

The Bottom Line

While BNPL services offer convenience, they come with the risk of overspending. Consider other payment options to protect your finances. To start, check your credit score to see if you qualify for a credit card with better terms. If your credit needs improvement, consider using services like Experian Boost® to increase your score by getting credit for eligible bills you already pay.

At O1ne Mortgage, we understand the importance of managing your finances wisely. If you need expert advice or mortgage services, don’t hesitate to call us at 213-732-3074. Our team is here to help you make informed financial decisions and achieve your homeownership goals.