Buy Now Pay Later is a boon for shoppers, allowing them to buy products by paying later without any interest stated Bahaa Abdul Hussein. However, it is important that BNPL must be used responsibly. Not doing so can make people end up in a debt trap. It can have other consequences too. We examine this important aspect in detail.

BNPL – an overview

BNPL is a payment method that most online retailers today offer to customers. BNPL allows a shopper to buy a product and get it instantly without having to pay. The payment can be made later in installments. The best part of BNPL is that there is no interest on the installments, making it a very customer-friendly credit option.

The importance of using BNPL services responsibly

BNPL allows you to buy what you want on credit without interest. While this seems attractive there are certain risks attached. Let’s look at these issues in detail.

  • While there are no charges and costs for customers, there are stiff penalties and high interest on defaulting payment. If you do not pay on time, you need to pay interest and a late fee. The more you delay, the higher are these costs. They can become exorbitant.
  • Some people use BNPL to buy expensive goods. They may not be able to repay the installments. The larger the amount due, the higher is the interest, and penalty. It must be noted that the penalty can even be 25% of the product cost. Non-payment on time can have severe financial consequences.
  • Non-payment will lead to this information being sent to the credit bureaus. As a result, your credit score is negatively impacted. It will affect you if you want loans/credit in the future.

Because of all these reasons, it is very important to use BNPL responsibly. Decide if you really need the product or are just buying because you are getting credit. Evaluate if you will get the money to pay the installments on time. Only then, go ahead and buy. This is the responsible way of using BNPL.

Conclusion

BNPL is a path-breaking innovation in the credit payment system, offering a win-win situation for all stakeholders. While BNPL is no doubt beneficial, shoppers must be prudent and use it responsibly. Misusing this facility can lead to huge costs in terms of interests and penalties. It can also affect credit score. This is why people must use BNPL responsibly and think twice before buying using this option. Thank you for your interest in Bahaa Abdul Hussein. For more information, please visit www.bahaaabdulhussein.com.