No Pain, No Gain? That’s not how we do it anymore. Especially not when it comes to saving for that laptop upgrade or new dress. Buy-Now-Pay-Later (BNPL) services such as Openpay have made it so easy for us to access money that we don’t actually have. Gone are the strenuous application processes for credit cards and exorbitant annual fees to maintain rewards programs that seem to never reward you for anything. Plug in your name, email and some official ID and away you go. But as a wise man once said, “with great power comes great responsibility.”
So, what could possibly go wrong you may ask? Well, like most things involving money, if you pay on time, every time, then it is pretty safe. But that’s also where the problem lies. Because these BNPL services don’t charge interest, they instead choose missed or late payment fees. These fees can quickly rack up into the hundreds of dollars if you’re not careful. The cause of this can be as simple as not having enough money in the bank account linked to the BNPL service.
When planning your budget for 2021, BNPL can be an incredibly useful tool to spread out bigger expenses. Being able to service your car without having to dig deep into your savings or limit your lifestyle is obviously an attractive proposition. But before you start out on the BNPL route for the new year it’s important to set rules for yourself to prevent yourself from getting into repayment troubles!
Do you know your budget and what you can comfortably pay off in the next 2-24 months?
Do you have any BNPL plans you are already paying? Keep track of how many plans you have active and the payment dates, so you don’t overcommit and lose track of them all.
Does your purchases align with your values? Set clear rules on what you will and won’t use BNPL services for, and don’t be swayed by special offers on things you don’t want or need.
Ultimately, using (or not using) a BNPL service is a personal one as everyone’s priorities and appetite for risk is different. Making the decision can be tough when you don’t know what to look out for, but hopefully having a few guidelines in place when going through the decision-making process will make it easier when choosing whether BNPL is the way to go to budget this new year.