Online Purchases: Pay Now or Use That ‘Pay Later’ Feature?

The convenience of online shopping is undeniable. Just a few clicks and your desired item arrives at your doorstep. However, with the ease of online transactions comes new temptations such as the “Buy Now, Pay Later” options. These types of features allow you to split your purchase into installments, letting you tap that “buy now” button instead of just adding another item in your endless cart list.

While this might seem like a magic solution, understanding the pros and cons is crucial before clicking on pay later.

Splitting Up Payments Feature: A Budgeting Tool (or a Trap)?

Pay later options can be a budgeting tool for responsible users. Splitting a larger purchase into smaller, more manageable payments can ease the financial burden and make it easier to stay on track with your budget. For example, if a new phone costs PHP20,000.00, spreading the cost over four installments of Php 5,000 might seem more manageable than a single upfront payment.

However, pay-later options can also lead to overspending. The ease of saying “yes” to a purchase now and dealing with the consequences later can be tempting. This can quickly lead to impulse purchases and potential debt. Remember, even if the installments are interest-free, late fees can accumulate quickly, negating any perceived savings.

Beyond the Initial Transaction: Hidden Costs and Potential Debt

While pay-later plans might advertise ease of purchasing, there might be hidden fees associated with late payments or missed installments. These fees can quickly add up and erode any benefit of the split payment structure.

Furthermore, pay-later transactions can negatively impact your credit score, especially if you miss payments. Responsible credit use is essential for building a healthy credit history, which can influence your access to loans and favorable interest rates in the future.

Pay later plans can be a useful tool, but it’s not for everyone. Before using a BNPL option, carefully consider your financial situation and spending habits. If you have a history of impulse purchases or struggle with sticking to a budget, choosing pay later might not be the right choice.

Here’s a nice rule to adhere to: Only use a pay-later option for planned purchases that you can truly afford to split into installments. Always prioritize paying your balance on time to avoid late fees and potential damage to your credit score. (GFB)