Should You Use a ‘Buy Now, Pay Later’ Plan for Your Holiday Shopping This Year?

It might be a good idea, but you’ll want to proceed with caution.

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the main points

• Buy now, pay later plans have grown in popularity in recent years.
• Although it’s a good choice for some holiday shoppers, this may not be the case for you.

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Even though we’re still several weeks away from the actual vacations, now is the time when a lot of people start getting serious about their shopping and planning. And if you are one of them, you may already have a list of gifts that you need to buy.

If you don’t have enough money to pay for all these purchases directly in the next two weeks, you have options. First, you can charge the credit card for these purchases and pay off your balance in a timely manner. But if you go this route, you will accrue interest on any purchase that you cannot pay off in full (unless you have a credit card with a 0% interest rate).

Another option you might want to consider is Buy Now, Pay Later or BNPL Plan. BNPL plans have grown in popularity over the past few years, and they allow you to pay for purchases in installments. Usually, you will pay some of the money up front and then pay the rest every two weeks over the course of two or three months.

BNPL plans can be a good option for consumers, especially during the holidays. But you have to be careful when signing up for one.

The upside of BNPL plans

BNPL plans allow you to pay off your purchases over time without accruing interest. With one of these plans, you actually don’t incur any fines or fees unless you fail to stick to your payment schedule. And you can generally get your BNPL plan approved right away.

The downside of BNPL plans

BNPL plans can get expensive if you can’t keep up with your payments, as the benefits and fees will then start to apply. Just as a late payment on a credit card can have a negative impact on your credit score, a late payment on a BNPL plan can lower your score.

It really depends on your financial situation. If you need a lot of wiggle room while paying for larger purchases but are confident in your ability to stick to a short-term payment plan, a BNPL plan may be a good option. Likewise, if you expect a lump sum at the end of the year, you can pay to choose a BNPL plan.

Let’s say you want to buy a $400 item as a special gift for your child in mid-November, only that you don’t have enough money to pay for it in full at that point. If your employer has promised you a cash bonus of $1,000 to be paid by mid-December, funding that purchase via a BNPL plan might not be a bad idea. But if you’re not sure where you’ll get the money to cover your premiums, you should pass on the BNPL plan - and the purchase itself.

In fact, as a general rule, it’s really best to avoid any kind of vacation debt - even if it’s caused by a desire to make the vacations private for the important people in your life. And it’s best to stick with gifts that you can easily afford — even if it means having to make changes to your list.