Can You Buy Now, Pay Later?
The “Buy Now, Pay Later” (BNPL) feature allows consumers to enjoy a product or service first, and pay for it in instalments later. It combines modern technology and a traditional instalment payment plan to offer them more flexibility. As the BNPL option meets the needs of consumers, it has become increasingly popular in online shopping and mobile payment. When consumers choose BNPL at checkout, the BNPL platforms will make payments to the merchants on behalf of the consumers, who will then repay the money in instalments to the platforms. While this option offers convenience, it also carries certain risks. It is important for consumers to understand its features and choose a right payment method.
Features of BNPL
| Interest-free instalments | 「BNPL platforms allow consumers to split the payment into several instalments without interest and service charges. However, those who fail to make repayments on time may have to pay a high penalty or interest, which can increase their financial burdens. |
| Credit score | The application threshold of BNPL is usually lower, so that people without a credit card or with a low credit score can also enjoy the flexibility. BNPL also provides a new payment option for students, housewives, and freelancers. However, frequent late payments may undermine their credit score, and may eventually affect their future credit product applications, such as housing mortgages, car loans, and credit cards. A bad credit score may also affect students’ future career, as employers may check applicants’ creditworthiness through their credit reports. |
| Flexible spending vs overspending | As BNPL allows consumers to manage their cash flow flexibly, it is a great payment method for those with unstable income or short-term cash needs to purchase first and pay in instalments later. However, as consumers do not need to make the full payment on the spot, they may overlook their financial situation and overspend, leading to additional BNPL debts. |
Tips on choosing BNPL
BNPL has its own pros and cons. Regardless of how consumers choose to pay, they must settle the bill sooner or later. Here are some tips on considering and using BNPL wisely.
- Read the terms and conditions, including the repayment period, interest rate, handling fee and late payment penalty, carefully before using BNPL.
- Avoid impulse spending. Take a step back and reconsider your actual needs before making a purchase. You may also use the IFEC Money Tracker to create a budget for the relevant expenses.
- Choose a safe and reliable BNPL platform.
- Evaluate your financial wellness and repayment ability by using IFEC Borrowing and Debt Calculator to ensure that you can make repayments on time.
- Before choosing the BNPL option, calculate the total amount of the instalments and that of the products involved to ensure that the transaction details are correct.
- Set up a reminder for instalment payment to ensure timely repayment and avoid late payment penalties.
- Keep records of all purchases and repayments, so that you can make enquiries and complaints when necessary.
- Understand the return and refund policy of the BNPL platform, including how to handle the paid instalments and the processing time and method of refund in case you need to return the item for a refund.
14 October 2024
