Buy Now Pay Later, a growing industry with some big players in the space (think Openpay!). You’ve likely heard a lot of conversation on the topic, so we thought we’d summarise all the big talking points…
BNPL services have effectively opened up a quick and easy way to getting short term credit without the hassle of going through lengthy application processes you get with traditional form of credit.
People love (and love to hate these services) for this exact reason. But with all the thoughts, theories and hot takes surrounding BNPL, where does the truth actually lie? Well, the answer is… it depends.
Everybody’s circumstances and money goals are different, but here at Mandy Money we thought we would list a few pros and cons to make that decision just a little bit easier for you.
Pro #One: Payment Flexibility
Being able to decide whether you want to pay weekly or fortnightly and how long you want to take to repay (within reason!) can be super useful when trying to matchup repayments with cash inflows like a weekly pay cheque or a fortnightly Youth Allowance payment.
Con #One: It’s not everywhere… Yet!
Ultimately, individual retailers have to decide whether they are willing to enter into a contract with a BNPL service. And they don’t have to sign up with everyone either. This may mean that you can’t use your preferred BNPL for that new pair of jeans.
Sure, you could sign up to a BNPL that supports that shop, but then all of a sudden, you’re sitting with 3 or 4 BNPL services and keeping track of repayments can get tricky!
Pro #Two: It’s not just retail
When I say BNPL, you say impulse purchase! Or not? BNPL is for more than just buying feel good items, infact, you can now pay for your upcoming car service or an unexpected trip to the dentist with BNPL.
More and more industries are adding BNPL as a payment option. Most recently Openpay recently announced a partnership with Stack Sports, a platform for people to pay their membership and registration fees.
Con #Two: It’s not everywhere… Yet!
BNPL may be cheap, easy and with few, if any fees. But have you thought about how you are funding your BNPL account? Because if you’ve hooked up your credit card and are using it to pay your BNPL instalments then unfortunately you’re still going to be on the hook for interest on your credit cards if you don’t settle your balance within the interest free period of your card (which is different depending on which credit card you have).
Pro #Three: No (or minimal) fees… if you pay on time
Each BNPL has different fee structures. But as a general rule, the cost of maintaining a BNPL account and having an outstanding balance doesn’t cost much, if anything.
There may be a small monthly account keeping fee or transaction fee but nothing that will break the bank, and you don’t have interest like you do with credit cards. Often if you repay your purchase within the plan length it won’t cost you anything extra at all.
Con #Three: The fees… if you don’t pay on time
This is the big one. Late fees are one-way BNPL companies make money, and if you miss a payment or two, the costs can start to stack up. If you miss a payment, they will come after you with late fees that can start to stack up in the blink of an eye, plus some will block you from making any more purchases.
The fine print also says that some BNPL companies can report you to credit ratings agencies which could impact your ability to make big purchases like a house down the road. Always pay on time? No problemo. And you find yourself missing payments on the regular, there are options to changes to your repayment schedule, so check with BNPL provider what options they can give you.
So now that you have an idea of the good and the bad, it’s up to you. Have a think about why you need BNPL. Do the benefits outweigh the risks? This will be different for everyone, but at least now you’ve got some info to make a decision with!