More retailers are offering BUY NOW, PAY LATER (BNPL) No-Interest Services. From grocery stores to home improvement stores to apparel stores, many retailers are offering these products. Currently, according to WalletHub-

61% of Americans do not know how differed interest or no interest BNPL purchases work.
51% of Americans say they have agreed to a BNPL plan without being sure they could make the monthly payments.

What are BNPL's? Should I consider taking advantage of them? What are the pitfalls?

First and foremost, these are financial products in the same way a credit card is a financial product. While each retailer’s terms and conditions vary, they basically operate like a zero percent interest card. That zero percent interest expires at some point (the term) and if there is a balance, you pay interest.

In the case of BNPL financing plans, failure to meet every term of the agreement can create a situation where you are liable for fees and, sometimes the entire interest due on the original purchase. Sometimes you can be liable for both.

So, these products can be worse for you than you think, much worse. The devil is in the details, the terms. The overarching key word to these agreements is the word “IF”. If you don’t meet the terms, then...

...the problem is the “THAT”.

• The issuer charges you interest on the entire purchase going back to when you bought it, for example.
• They charge you a one-time and/or an recurring fee for having not met the terms of the agreement.
• They may have a pre-payment penalty to dissuade you from trying to refinance later.
• There is no room for negotiation. You pay full price.
• Most require a credit check (after all, it is a loan) which can impact your credit score.

The point is, each offering is retailer dependent and, thus, their terms may differ from one agreement to another.

WHAT TO DO?
Think about it. Do I really need this purchase? If so, is there is a better way to pay for this purchase? Does my budget allow for this additional monthly expense? Don’t just sign on the dotted line. Read what you are about to sign to fully understand what you are committing yourself to.

Next month, we’ll look at how you should look at BNPL financing options and when it might make sense to take advantage of it.

OUR ADVICE
Financially speaking, BNPL no-interest offers can be a wolf in sheep’s clothing. Be purposeful and thoughtful about your purchases. Make sure you are correctly looking at a purchase for what it really is; a need verses a want.

Whatever your financial need, we’re here to help.